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**The Truth, the Whole Truth, and Nothing 
But the Truth** 



ABOUT PANICS 

HARD TIMES 

The Cause and the Cure 



BY 

JAMES POLLOCK KOHLER, 

LAWYER, NEW YORK CITY 

Office and Post Office Address: 

TEMPLE BAR BUILDING 

Brooklyn, New York City 



AN A, B, C OF POLITICAL ECONOMT 

Second Edition y Corrected and Enlarged 



PRICE ::::::: 15 Cents 



*'The Truth, the Whole Truth, and Nothing 
But the Truth'' 



ABOUT PANICS 

HARD TIMES 

The Cause and the Cure 

BY 

JAMES P@LL©CK K0HLER, 

LAWYER, NEW YORK CITY 

©ffice and Post Office Address: 

TEMPLE BAR BUILDING 

Brooklyn, New York City 



AN A, B, C OF POLITICAL ECONOMY 

Second Edition\ Corrected and Enlarged 



PRICE ::::::: 15 Cents 



/^ 6 37/1 



Copyright, 1908, by James P. Kohler 



^Hi Estate of 

■<^'?ar and Err. ma Qohrend 
^ov. 1 4 3 9Sf. 



The Outing Press 
Deposit, N y. 



Bebtcateb 

TO 

THOSE NOBLE SOULS OF ALL LANDS WHO, 
AGAINST GREAT ODDS, ARE STRIVING TO 
MAKE OF THIS WORLD AND OF THE 
PEOPLE IN IT WHAT THEY SHOULD BE. 



CONTENTS 

Chapter Page 

Introduction. ,....! 

I — What I Mean by Panics , . . i 

II — Alleged Causes of Panics . . .4 

Henry Ward Beecher's Theory . . 4 
The James G. Blaine Theory ... 5 

The Over-Production Theory . . . $ 

The Extravagance Theory . . . 6 

The Old- School Economists' Theory . 7 

Theory of Our Modern Economists . . 8 

The "Business-Gets-Tired" Theory . 8 

The Theory of Banker Henry Clews . 9 

The Theory of the Socialists . . .10 

. Some Scattered Causes for Panics . .12 

III — The True Cause of Panics . . • ^3^ 

The Real Estate Boom the Cause of Panics 13 
Real Estate Booms Man's Greatest Enemy 14 
Panics a Disease of Business . . -14 

What is Business? . . • -15 

The Three Factors of Production . .16 

How the People's Wealth is Distributed . 19 
The Struggle Between Capital and Labor 20 
IV — How the Real Estate Boom Cripples 

Business . . . . • -27 

The Real Estate Boom a Grand Game of 

Poker . . . . . -3° 

The Business Man Has Not Yet Seen the 

Cat 31 

V — Purchasing Lots on the Installment Plan 32 
VI — The Trouble Not Over When Land Boom 

Ceases . . . . . • 3^ 



Chapter Page 

VII — The Building Boom a Good Thing . . 40 

VIII— What is Rent? .... 

The Fanner is Not a Rent Receiver 

The Small vs. the Large Landlord . 

The Inflation and Watering of Stocks 

IX — The Gradual Return of Prosperity . 

Expansion and Contraction of Population 
in Our Great Cities 

X — Money and the Banks . 

Why the Bankers Get Scared . 

Bank Failures Merely Incidents of the 

Boom ..... 

A Frequent Cause of Bank Failures 

XI — Can Currency Reform Prevent Panics? 
XII — Trusts — Governmental and Business Rot- 
tenness ..... 

XIII — The Remedy for Business Troubles: 
The Cure for Hard Times 



XIV — A Word to the Lawyer . 

A Word to the Other Professions 

XV — Summarv .... 



43 
45 
47 
51 

53 

54 
60 
61 

62 
64 

67 



76 

S2 
83 
84 



VI 



A STUDY 

BY 

JAMES P. KOHLER, 

Of the New York Bar 

Introduction 

All I ask of the reader is a fair and candid 
consideration of my argument; and if he finds 
conviction stealing in upon and overwhelming 
him I want, not only his verdict, or judgment, but 
that he too shall enlist in the high and noble 
cause of spreadnig this economic gospel. 



CHAPTER I 

WHAT I MEAN BY PANICS 

When I talk about panics I do not mean those 
little Wall Street flurries that come and go, and 
in which this banking house or that broker firm 
may fail and go to the wall. To-day the "Bulls" 
have their innings, to-morrow, the "Bears." In 
the constant tug of war going on between the 
powers that play the Wall Street game one may 
slip and go under to-day, another to-morrow, 
and next week even half a dozen may go down 
in the struggle. Millions of dollars may be lost 



and won, and individual fortunes may be built 
up or pulled down, and yet it is only a little 
convulsion in the financial district, which does 
not spread beyond the confines of a few small 
blocks. These flurries do not affect the general 
public or the nation's welfare. Wall Street 
gambling, or speculating, is like race-track gam- 
bling; it is simply a process by which money is 
handed around in bunches among those who are 
and hundreds of engines rusting in the round- 
less is, demoralizing to those who play, but its 
effect on the general business of the country, on 
the welfare and prosperity of the vast mass of 
producers and distributors of wealth, that com- 
prise the business interests of our great and 
growing commonwealths, is so slight as to be, 
from an economic standpoint, unworthy of seri- 
ous consideration. 

What I mean by PANICS are those periods of 
business depression, which, in this country, come 
and go, and come and go again, so that their 
periodicity is almost determinable by their regu- 
lar recurrence — those periods of depression when 
we have millions of idle men tramping the coun- 
try looking for work, when our great railroad 
systems have thousands of cars idle on side tracks 
and hundreds of engines rusting in the round 
houses, when millions of dollars lie idle in the 
vaults of our banking institutions, when the 
wheels of industry are almost stopped, and busi- 
ness failures increase; when prominent business 
men, tired of whistling for prosperity, commit 
suicide because they cannot stand the strain of 
business failure after their long or short period 
of business success. These periods of depression 
are worse than war, pestilence, and, I had almost 
said, famine, for to hundreds of thousands of 
our fellow citizens they really mean famine, or 
starvation, which is the same thing. 

We have had these panics in our country al- 
most from the beginning of our national exist- 



ence. In 1811 we had a slight touch of panic, 
then in 1818 a severe touch, then in 1828 another, 
then again in 1837, then in 1847, in 1857, '^^ ^^73^ 
in 1884, in 1893; and now we are just emerg- 
ing from the crisis of the industrial depression, 
idleness and waste, which shall go down in his- 
tory as the panic of 1907. Our panics have come 
about ten years apart, and have remained with 
us for from five to seven years. The 1873 panic, 
which was one of the worst our country has 
passed through, was somewhat delayed by the 
Civil War, which very much disturbed the regu- 
larity of the financial and productive routine. 
This present 1907 panic is also several years 
overdue. It should have been here about 1903 
or '04. Several causes operated to delay its 
arrival on schedule time. One cause of its delay 
was the amendment of the National Bank^ Act 
which permitted the establishment of national 
banks in our smaller cities or towns with a capi- 
tal of $25,000. This made possible a wider 
distribution of banking facilities, and enabled 
communities of smaller populations to enter upon 
and conduct business enterprises with greater 
ease than formerly, all of which had a tendency 
to lengthen the period of business prosperity. 
Another factor was the increased production of 
gold, which added millions of dollars to the cir- 
culating medium, the production of gold to-day 
being equal to the production of both gold and 
silver a decade ago. But the most important 
element in prolonging the properous business 
period, in my opinion, was the confidence among 
business men which followed the legislation 
establishing the gold standard. Business men 
(who know better now) thought that the gold 
standard was all that was necessary to establish 
permanent prosperity. Their business ventures 
and new enterprises, which called for large out- 
lays of money, kept labor employed for a longer 
period than formerly. And so prosperity, now 



departed, was with us longer than usual. The 
gold standard certainly injected into the busi- 
ness world a confidence which had much to do 
with stimulating investments in new enterprises 
that otherwise would have been impossible. But 
the panic is with us again, and all this misplaced 
confidence has been dissipated. Still we have 
men of prominence in the financial world who 
think that currency reform — of some sort or 
other — will forever obviate panics. Foolish, 
foolish men ! 

(I shall discuss in a later chapter the effect of 
money on business and the phenomena of burst- 
ing banks as incidents of our panics.) 



CHAPTER II 

ALLEGED CAUSES OF PANICS 

Many causes have been given for these recur- 
ring panics, or periods of depression. Their 
periodicity for a century past has attracted the 
curiosity of thinkers and writers on economic 
subjects, and there have been advanced and ad- 
vocated almost as many reasons for them as we 
have had panics. 

Henry Ward Beecher's Theory 

After the great panic of 1873, Henry Ward 
Beecher, one of America's greatest orators, de- 
livered in all parts of the country a lecture on 
"Hard Times." In his lecture he attributed the 
panic to ''loss of confidence," but he never told 
us why confidence was lost. He spoke of the 
Vermont schoolmarm who had invested her 
money in enterprises that had failed, and of 
how the knowledge of her loss spread to other 
schoolmarms, so that, instead of investing in 
further enterprises, they all hid their money in 



a stocking and put it in a chimney hole in the 
wall. Why the enterprise, into which the school- 
marm had put her money, failed, Mr. Beecher 
said naught. I lose my purse and with it I lose 
my confidence, "get rattled," but WHY do I lose 
my purse? That is the great question. And I 
intend to answer that question. Why does the 
business community lose confidence? 

The James G. Blaine Theory 

Panics have been attributed to legislation, or 
threatened legislation, by Congress on such sub- 
jects as money, the tariff, and so on. In Blaine's 
"Twenty Years in Congress," we are told that 
some of the panics through which our country 
has passed resulted from Congressional tinker- 
ing with money or the tariff. Change in the 
ratio between gold and silver in the coinage; 
tariff reduction, or threatened free trade, have 
been the trouble, according to him. Yet we all 
know that we have had panics during periods 
of the highest tariff and we have had good times 
when the tariff was comparatively low. We have 
had panics in Democratic, in Whig and in Re- 
publican administrations, and I am free to say 
that we have never yet had any change, or 
threatened change, in any of our Federal legis- 
lation that has either produced or cured a panic. 

The Over-Production Theory 

Some economic writers say that our panics 
are the result of over-production. The country 
has produced too much wealth, they say, and 
production must stop until we can catch up. 
This is the observation of the superficial observer, 
who mistakes under-consumption for over-pro- 
duction. To say that we have pi'oduced too 
many shoes when thousands of children are only 
half-shod, too many clothes when people shiver 
in the streeets of our cities for lack of clothing. 



too much food when hungry men and women 
and children are seeking reUef through charita- 
ble sources, and all this during the hard times, 
which, as they claim, are caused by over-produc- 
tion, is mockery added to absurdity. I shall 
show later on why we have under-consumption 
and that this under-consumption brings what 
seems to be over-production, but there can be no 
such thing as over-production until every mouth 
is filled, every back is covered, and every foot 
is shod. It is cruel to talk of too much when 
so many have so very little. 

The Extravagance Theory 

Other economic writers say that the panics 
come from extravagance, that the people buy too 
much, spend their money too freely, live too 
high, etc. In the Spring of 1888, after the 1884 
panic, I was coming up from Florida in a Mann 
boudoir car. Only two passengers were aboard. 
We soon found ourselves together in the smok- 
ing compartment, and strangers though we were, 
we began discussing the business depression, a 
subject on every tongue from Maine to Florida. 
My fellow traveler claimed that "EXTRAVA- 
GANCE" was the cause. "Our people spend too 
much money," he said. "Why, the farmers in- 
sist on having things far beyond their means. 
Some of their wives will have carpets on their 
front-room floors and pictures on their walls, 
and they want pianos or organs, too, and some 
even go so far as to send their children off to 
school. Now this thing will not do," said my 
friend, "the nation cannot stand it." I asked 
him what his business was. He said : "I am a 
manufacturer of cigars. I have just been down 
to Cuba looking at my plantation." "Well," I 
said, "if the American people should take your 
advice, accept your views about extravagance 
and stop smoking cigars, what would become of 



your business?" He saw it at once, and betore 
we had reached Atlanta he had abandoned the 
extravagance argument and was wilHng to admit 
that it was this very extravagance, of which he 
and other business men complained, that kept 
the wheels of industry revolving, and made it 
possible for him and them to carry on the par- 
ticular businesses in which they were engaged. 
We have a few people now who are talking 
about extravagance. 

The Old-School Economists' Theory 

The old-school political economists, who have 
written the text-books used in our colleges, such 
men as Adam Smith, John Stuart Mill, Francis 
Wayland, Sumner, Thompson, Seligman and 
others tell us that these panics come, or result, 
from the too rapid exchange of floating capital into 
fixed. They divide capital into "fixed" and "float- 
ing." The fixed capital is what lawyers call real 
estate, that is, land and the improvements thereon, 
and the floating capital is what, in law, is known 
as personalty — movables, money, etc. The claim 
that a too rapid exchange of money and movables 
into land and buildings is a cause for panics, 
seems frivolous, to say the least. A phenomenon 
in the economic world has been witnessed by these 
writers and they have jumped at conclusions 
that will not bear investigation. Or, if they will 
bear it, lead us into a discovery of the real cause. 
They saw, just before the panic, that there was 
quite a stir in the real estate world. That build- 
ings and other improvements on land multiplied 
rapidly, and that the land itself increased in 
value, and they then wrongly concluded that 
dollars and machinery were being transformed 
into land and buildings. This has never been 
so, and its advocacy shows through what shallow 
depths these "leaders" of economic thought have 
waded. 



8 



Theory of Our Modern Economists 

Our modern financial writers, who attempt to 
explain the whys and wherefores of this and that 
Wall Street phenomenon, have taken the cue 
from these older writers, and now we are told, 
in column after column of "Financial News," 
that the panic comes from a too rapid exchange 
of liquid into rigid capital. The modern term 
'liquid" takes the place of the old term "float- 
ing," and the modern term "rigid" substitutes 
for the older term "fixed." The same phenom- 
ena are present with every panic, but phenomena 
are not necessarily causes. The Northern Light 
is not the cause of the Northern Light. What 
is the cause? Can it be said now, or at any 
time, that money has been transformed into land, 
or that machinery has been changed into build- 
ings, either by slow or rapid process? Cer- 
tainly not. The money is still in existence, and 
the man who can convert machinery into build- 
ings has not yet beeen found. 

The "Business-Gets-Tired" Theory- 
Several new causes for panics have been ad- 
vanced lately. We are told that "Business gets 
tired and must rest." Think of it — that "business 
gets tired." Millions of men must remain out of 
work, their wives and children suffering for the 
necessaries of life, banks must break and busi- 
ness enterprises go into the hands of receivers 
because "Business gets tired." No! Just so 
long as a man has a want or a desire and has 
money with which to satisfy that want or desire 
business will not get tired. Business, instead of 
getting tired, will increase in activity with the 
increase in intelligence and prosperity of the peo- 
ple. Everybody is now anxious to do business, 
^nd yet we are told that business is tired and 



must rest. Business gets throttled, but who 

throttles it ? Let us see. Getting throttled is very 
different from getting tired. 



The Theory of Banker Henry Clews 

A New York banker and broker, Henry Clews, 
lecturing on this panic, tells his audiences that 
the cause of it is the Boer War, the Spanish 
War, the Russo-Japanese War, and with these 
he mixes in a little of the late San Francisco 
earthquake. ''All of these combined brought it 
around," he says. He does not, however, tell 
us how they brought it around. ■ Now, I can 
conceive of an economic situation in which a 
war, or an earthquake, would be a positive relief 
to some people. If I owned the entire Island of 
Manhattan, covered from the Battery to the 
Harlem with buildings, and I had concluded that 
I 'did not wish to erect any more buildings or 
have any more improvements made, and thou- 
sands of my fellow men were tramping the 
streets looking for work and could not get it, 
though their families were starving, a little 
earthquake that would shake down a few miles 
of my improvements and give these men work in 
putting them up again would be a positive bless- 
ing to them — if not to me. The "quake" might 
be unpleasant, like the pulling of a tooth, but in 
such an economic situation the after effects on 
the great multitude would go far to offset the 
drawbacks brought by the temporary shock. The 
San Francisco earthquake, horrible as it was, 
really added to our prosperity. It created a 
market for idle labor, helped to raise wages, 
stimulated railroad traffic and the general indus- 
trial activity, and, in that way, it was a substan- 
tial benefit commercially. Property, of course, 
was destroyed, and some lives were lost^ — all 
to be regretted — but it brought about a redis- 



lO 

tribution of some of the wealth of the country, 
and that redistribution, by increasing the pur- 
chasing power of a large part of the mass of our 
workers, gave us some of the prosperity in busi- 
ness through which we have just passed. As 
for the wars, which Mr. Clews includes in his 
causes of this panic, they were too remote to 
have anything to do with our present depres- 
sion. History, however, records that wars 
always stimulate business, though the country 
which loses the fight may suffer some depression 
while paying the indemnity, or cost of the war. 
A very large navy, or a very large standing army, 
may sap the resources of and impoverish a 
nation, as it has done and is doing now, but a 
war, under present economic conditions, may, 
by decimating the ranks of labor, raise wages 
and increase consumption and make good times 
for a while for those that are left. 

Do not, please, conclude that I advocate war 
or earthquakes. As a follower of the "Prince bf 
Peace," I detest war. And may we not hope soon 
to see the civilized nations get wise enough to do 
away with it altogether, and turn the money they 
spend on armaments and battleships into colleges 
and universities, the building of which latter will 
cost no more money and will provide just as much 
work for the followers of our modern politicians. 
But how much more useful they will be to 
mankind ! 

The Theory Advanced by the Socialists 

The modern socialists have advanced a theory 
for the panic, and, of course, according to them, 
socialism is the only possible cure for hard times. 
The socialist unthinkingly accepts the termin- 
ology of the old-school economists and sees noth- 
ing before him but "capital and labor" — both 
engaged in an endless and inevitable struggle. 
To him the employer is the capitalist. The 



II 

capitalist employs because he owns the "Tools 
of production," while the laborer is employed 
because he owns no tools. The employer pays 
to the laborer only such wages as the law of 
supply and demand in the labor market requires 
that he shall pay. With the tool that is owned 
by the capitalist (and with which the laborer, 
who is hired, produces all the wealth), so much 
wealth is produced that the laborers cannot con- 
sume it all because the wages they receive are 
not high enough to enable them to purchase back 
for consumption the things which they have pre- 
viously produced. The socialist says that if the 
laborer received more wages his consumptive 
power would be so enlarged that there would be 
no surplus of wealth, no over production, and 
hence, no panics. The socialist seems not to 
understand the law of wages, nor to see that 
wages can be raised up to the maximum he is 
talking about without going to all the trouble 
involved in the socialistic scheme, to wit, the 
nationalization of all the tools of production arid 
the carrying on of the production by the govern- 
ment, which shall take over and operate the tools 
and turn all the people into government em- 
ployees in a sort of co-operative commonwealth. 
I am free to admit that socialism, if possible, 
would be a great improvement over present con- 
ditions of production and distribution, but I 
must express my belief that in a country like 
ours complete socialism seems to be absolutely 
impossible, though modified forms of it are 
desirable. A cure more satisfactory and specific, 
and more in harmony with American ideas, can 
be brought about in half the time necessary to 
establish the socialist system here. 



12 



Some Scattered Causes for Panics 

I have lately heard intelligent men say that our 
labor organizations have brought this panic about 
by insisting upon too much wages for building 
houses, running trains, etc. This statement to 
many seems so plausible that it should be said 
that increased wages always increase the pur- 
chasing power of the great bulk of consumers, 
and, that while consumption is going on, the 
demand for the houses will increase and railroad 
traffic will so grow that the few dollars that are 
paid as increased wages cannot hurt either the 
house-builder or the railroad, or any business 
interest. It is only when consumptive or pur- 
chasing power is concentrated among the few 
that disaster to business awaits us, not when 
such power is scattered or distributed among 
the large mass of wage-earners in increased 
wages. 

Some of our newspapers give these causes : 

"Overtrading in all branches." — New York 
Sun. 

"Overbuilding of railroads and overspecula- 
tion." — New York Post. ■ 

"Confidence is all that is lacking." — Real Es- 
tate Record and Guide. 

"Capital is scarce." — St. Louis Republican. 

"People at large are poor." — Baltimore Sun. 

"People hoarding their money." — Baltimore 
American. 

"Extravagance in expenditure." — Matthew 
Marshall. 

"Too many people in the city." — Chicago 
Tribune. 

"Too many men till the soil." — Chicago Inter- 
Ocean. 



13 



CHAPTER 111 

THE TRUE CAUSE OF PANICS 

Having briefly reviewed some of the alleged 
causes of panics, and having claimed that none 
of those alleged gives a satisfactory explanation 
of them, it behooves me to modestly set forth 
my own theory as to the causes of our panics. 

The Real Estate Boom the Cause of Panics 

My own experience, and the study that I had 
given to the subject, led me to the conclusion 
many years ago that our Panics and Industrial 
Depressions come from the booming of real es- 
tate in the cities, towns and villages of our 
country. I can, with confidence, point to history 
to bear out my assertion, for every panic we have 
had in this country was preceded by a real estate 
boom. The price of land advanced in value by 
leaps and bounds before each one of our panics. 
But assertion and history are not enough. I 
am put to my proof, as the lawyers say. I 
must demonstrate, beyond a reasonable doubt at 
least, that the panic is the result of the real 
estate boom. I must point out in detail the effect 
of such boom on the business of the country 
and show how it comes about that after every 
real estate boom many of our banks fail, and 
then immediately, and for long periods, we have 
millions of idle dollars lying in our bank vaults, 
while the side tracks of our railroads are crowded 
with idle cars and millions of able-bodied men 
walk for years the streets of our cities and our 
country roads looking for work, while their wives 
and children suffer for the bare necessities of 
life; with suicide and insanity multiplying on 
every hand. 



H 



Real Estate Booms Man's Greatest Enemy 

Before entering upon the presentation of my 
argument I wish to affirm, with all the solem- 
nity that I can muster, that in my belief the 
real estate boom is the greatest enemy that 
has yet preyed on mankind. That its ravages 
on humanity are worse than those of all the 
diseases combined, for it is the parent of pov- 
erty, and poverty is the breeder of disease and 
crime and ignorance. The greatest miracle that 
mankind can witness is the long-suffering pa- 
tience of our business men and working people 
while waiting for the return of prosperity after 
the real estate boom has come in and killed the 
prosperity which the working people and the 
business men of the country for a brief period 
enjoyed. 

Panics a Disease of Business 

To clearly understand what a panic is, and 
to be able to point out the cause and prescribe 
a remedy for our panics, it is necessary to 
analyze what is known in the modern industrial 
world as ''BUSINESS." We hear people talk- 
ing about good business, and bad, or poor, busi- 
ness. When business is good, we have good 
times ; and when business is poor, or bad, we 
have hard times. We may, for the sake of 
convenience, or by an economic "fiction," call 
these panics a disease that business gets — a 
sort of chills and fever, or dry rot — for we know 
that when the first symptom of the panic strikes 
us, business men seem to shiver and lose their 
self-control and afterwards get a sort of stag- 
nant paralysis. Evidently, the subject of our 
inquiry is the cause of- this disease which busi- 
ness gets. From what sewer, or pest hole, or 
water source does It come? 



15 



What Is Business? 

An examination of the term "business" will 
show that we mean by the word simply the pro- 
duction and distribution of wealth. The econo- 
mists tell us that WEALTH is something which 
satisfies human desires. A beefsteak is wealth, 
so is a suit of clothes, so is a chair, a book, a 
house, an automobile or steam yacht. Any 
product which satisfies a human desire is wealth. 
Where that human desire is found we are said 
to have a market. Business men are constantly 
searching for this market, in this and other coun- 
tries. And their labor in searching for markets 
in other countries might better be applied in 
stimulating and enlarging the market they have 
at home. In this country we produce each year 
billions of dollars' worth of wealth. The corn 
and oats, the cotton and wool, the coal and iron 
and steel, the provisions and furniture and cloth- 
ing, which we annually produce, when measured 
by dollars, or by weights and measures, run 
into such figures that the mind of man is lost in 
the contemplation.* But after we produce all 
this wealth, we distribute it to those who have 
the desire for it; and the consumption of it by 
the distributees satisfies their desires. This pro- 
duction and distribution of wealth we call busi- 
ness. All these farms, forests, mines, locomo- 
tives, cars, wharves, ships and steamers, drays, 
telegraphs, telephones, factories, shops, stores, 
offices, banks, and what not, that the human eye 
sees on all sides, are involved or engaged in the 
production and distribution of wealth, and the 
men employed and occupied in them are known 

*The 1907 crops were valued as follows 



Hay $660,000,000 

Cotton. . 650,000,000 

Wheat 500,000,000 

Oats 360,000,000 

Rye 23,000,000 



Com $1,336,901,000 



Potatoes $190,000,000 

Barley 115,000,000 

Tobacco 67,000,000 

Rice 19,000,000 

Buckwheat ...... 10,000,000 



i6 

as business men. And I include also all that 
are engaged in either the production or distri- 
bution, or in both, whether male or female, as 
business men. So that my term business men is 
inclusive of all that are engaged in this pro- 
duction and distribution — both the laborer and 
the capitalist. 

But if we go a little further into our investi- 
gation we shall find that three factors are engaged 
in this production and distribution of wealth. A 
close examination of these three factors of pro- 
duction is absolutely essential to an understand- 
ing of the cause and cure of panics. 

The Three Factors of Production 

The first and most important factor in the pro- 
duction of wealth is LAND. Without land no 
wealth whatever can be produced. And by the 
term land I do not mean merely farm land or 
mines, or town and city lots. This term land 
includes all that some writers call nature. It 
includes all that was here before man came 
upon the earth at all. It includes the earth — 
25,000 miles round and 8,000 miles through — 
and all that is therein from the center to the 
circumference, and the fifty miles of atmosphere 
that is above and around the earth. All the ob- 
jects that we see around us were once land, and, 
when each shall have served its purpose, it shall 
go back to land again. The Bible says to man : 
"From dust thou art, to dust thou shalt return." 
What the Bible means by "dust" I mean by 
land, only that land includes far more. The 
force of gravity is included in the term land, 
and this force is of tremendous importance as 
a sub-factor in the production of wealth. At 
Minneapolis the Mississippi River flows for a dis- 
tance over a rough incline named St. Anthony's 
Falls. The power resulting from the break in 
the bed of the river and the force of gravity at 



17 

this point is utilized by flour mills, sawmills and 
other mills engaged in producing wealth. And 
so at Spokane Falls in Washington, and the 
Willamette Falls in Oregon, and hundreds of 
places elsewhere. At Niagara Falls many mills 
are run by diverting part of the Niagara River 
through chutes into mills that bring forth all 
sorts of products. If all the power of Niagara 
Falls were harnessed to machinery it is probable 
that every railroad and spindle in the Empire 
State could be run without expending a dollar 
for fuel. We are told that the tides are to be 
used to run machinery, and that the rays of the 
sun have been collected and reflected in such 
manner that they will help mankind. These tides 
and sun rays, that are to provide this power, are 
included in the term land. I also include the 
electric and magnetic forces of the earth. The 
earth is a great reservoir of raw material, of 
coal, oil, iron, copper, gold, silver, timber, etc., 
out of which we are producing wealth, and all 
these are included in this term LAND, which 
we designate as the first and most important of 
the three factors in the production of wealth. 

The next, or second, factor in the production 
of wealth is LABOR. And by labor I do not 
mean simply the muscular exertion of man in 
the production of wealth, but the brain that 
stands behind and directs the muscle. And the 
brain, also, that directs and superintends the 
muscles and brains of thousands of men in the 
production of wealth — the "Captains of Indus- 
try," as they are sometimes called, the men 
who plan, finance and build the railroads, the 
steamships, the wharves, the factories, the build- 
ings and stores. In this term labor I include, 
also, all those who indirectly aid in the produc- 
tion of wealth, as the teacher, the preacher, the 
writer, the actor, the artist — all those that in- 
struct, advise or amuse those who are engaged in 
the direct production. The comedian, who 



i8 

amuses and rests the carpenter after his day's 
work and fits him to better perform his labors on 
the following day, is a laborer; the teacher, 
training the youthful mind to think and care for 
himself, is a laborer; the minister, who instructs 
as to the true laws of economy — which are the 
laws of God — is a laborer, and well worthy of 
his hire. And the lawyer, who advises, guards 
and guides, is likewise a laborer, and lucky when 
he gets his fee. With these two factors, LAND 
and LABOR, we can produce a great deal of 
wealth without any other help. 

But man has invented, and, as far back as his- 
tory takes note of his doings, has used as his 
helper in the production of wealth, what we call 
"CAPITAL." And 50 our third factor is Capi- 
tal. 

Capital is the tool which labor uses to go to 
the land or natural resource to help him to pro- 
duce wealth. And man afterwards largely uses 
capital in the distribution of the wealth he has 
already produced. The tool which man uses he 
can destroy, wear out or throw away, and pro- 
duce another in its place by his labor out of the 
land. The land he cannot produce, nor destroy, 
for it was here before him and will remain when 
man has left the earth forever. To illustrate : I 
can go to a brook (land) and with my bare 
hand (labor) can catch a fish (wealth), and I 
will thus produce wealth without the aid of 
capital. Or I can, with my hand, dig up and 
soften the soil ; and again, with my hand, I can 
plant some seeds, which I may gather from a 
bush, and put them in the soil and cover them 
over with my hand, and when they are ripe I 
can gather the crop with my hands and thus I 
can produce wealth (a crop) without the aid of 
capital. All this is done by the co-operation of 
labor and land. But if I go to a tree and break 
off a limb and sharpen its end and with it spear 
my fish in the brook, then I am using capital. 



19 

So if I use a piece of tree, or a hoe, to dig up 
the soil and plant my seed, I again use capital. 
All these tremendous tools of industry which we 
see in our modern shops, lifting tons of molten 
iron, tons of pressed steel, are but developments 
of man's first and simplest tools. The Lusitania 
that crosses the ocean in five days, the modern 
wonder of the ship builder's skill, is but a devel- 
opment from the bundle of sticks which man, in 
his savage state, tied together to help him cross 
a stream. From bundles of sticks he took to 
logs, and then to hollow logs, then to bark canoes, 
and from that on up the weary path of progress 
to the modern vessels used in navigation. With- 
out going too far into the realms of speculation 
it is probably safe to say that the attempt of pre- 
historic man to navigate the water was as diffi- 
cult and hazardous as the attempt of modern 
man to navigate the air. And eventually man will 
overcome the difficulties in navigating the air 
as he has the obstacles in navigating the water. 

How the People's Wealth is Distributed 

As I said before, in this country we produce 
each year billions of dollars' worth of wealth. 
That wealth is produced by the co-working or 
co-operation of these three factors, LAND, 
LABOR and CAPITAL. And when all of this 
wealth is produced it is distributed among these 
three factors, one share going to land, the first 
factor, one share to labor, the second factor, and 
one share to capital, the third factor. In this 
distribution of wealth the share which goes to 
Land we call RENT, the share going to Labor 
we call WAGES, the share going to Capital we 
call INTEREST. 

So there we have them : LAND, LABOR and 
CAPITAL, the three factors; RENT, WAGES 
and INTEREST, the three shares into which is 
divided the wealth which these factors produce. 



20 

The wealth produced each year in our country, 
may be likened unto a great pie, which is to be cut 
into three pieces. The pie may be cut first right 
across the middle, giving us two halves, and then 
one of the halves may be cut into two equal pieces, 
giving us one-half and two-quarters, and still 
we have but three pieces in our pie. Or, it may 
be cut so that each piece will be one-third of the 
pie, or so that one piece will be 98-iooth of the 
pie while the other two pieces will each be but 
i-iooths of the pie, three such pieces making 
the whole pie. 

All of this trouble with business, which we 
call panics, comes from the way we cut our pie. 
One of the three pieces of the pie is entirely 
too large, and is still growing, while the other 
two pieces are entirely too small. The share of 
the total wealth product which is annually going 
to LAND as RENT is ever increasing at the 
expense of the shares which annually go to labor 
as wages and to capital as interest. The REAL 
ESTATE BOOM, which I have said is the 
cause of our panics, is simply the means, or 
process, or economic force, by which the share 
of wealth going as rent to land grows or is in- 
creased. The boom increases rents and the 
value of land until capital and labor have little 
left to divide between themselves as interest 
and wages. 

It is to be noted here that the recipients of 
rent for the use of land are a very small frac- 
tion of the population, while those who receive 
interest and wages comprise the bulk of our 
people. 

The Struggle Between Capital and Labor 

We hear much of the irrepressible conflict 
between Capital and Labor, a struggle, we are 
told, that shall never end. The entire wealth 
product, they tell us, is divided between capital 



21 



and labor and that they ever have been, are, 
and always will be struggling over the division 
of the product. But capital and labor may be 
likened unto the two wings of a bird, or the 
two legs of a man, and they should have no 
quarrel whatsoever. Another thing, the quar- 
rel between capital and labor is absolutely 
unnecessary, is superinduced, and is the result 
simply of the false political economy with which 
business and professional men have been filled 
by our colleges and the old-school economists. 
What reason has the man who fishes to quarrel 
with his rod and line, or the man who digs to 
quarrel with his hoe ? And if the fishing rod or 
the hoe are owned by another man than the one 
who uses them, to help him to produce wealth, 
why should the user be not willing to pay to the 
owner a full round return for the use of the 
tool? The man who hires out the tool is en- 
titled not only to the increase which his own use 
of the tool would have brought to him, but, in 
addition, perhaps, a fair compensation (interest) 
for the wear and tear resulting through its use. 
This conflict between Labor and Capital is 
forced upon them by our Land System, through 
which so great a portion of the wealth produced 
is taken as rent for the use of land. Labor and 
Capital quarrel, not over the division of the 
total product, but over what is left of the total 
product after land gets, or takes, its share as 
rent. The only quarrel a man with a rod and 
line or with a hoe or shovel can have is with 
the man who claims to own the brook and says 
that the man with the rod cannot fish therein, 
or with the man who owns the earth and says 
that the man with the hoe or shovel cannot pro- 
duce wealth therefrom. I, the rent receiver, am 
hiding behind a bush, while off in the open are 
two men, the employer and employee (Capital 
and Labor, so-called), in a hand-to-hand strug- 
gle, each delivering on the other blows that 



22 

weaken both and threaten them with disaster. 
While they two are fighting with each other I 
throw a stone, first at the one, and then a stone 
at the other, damaging first the one and then the 
other, until my throwing of stones from behind 
the bush hurts both of the two fighters more 
than they can hurt each other by their blows. 
But they do not know that I am throwing the 
stones, and as I hit one he thinks his antagonist 
has done the injury and he hits back harder 
than before; and as I hit the other he is of the 
same impression and redoubles the strength of 
his blows, while I, all the time keep on throwing 
stones at both the combatants. If these two 
combatants could but see me throwing stones 
at them from behind the bush it seems that they 
would stop fighting for a minute and come after 
me, and when they once got rid of me perhaps 
they would sit down and talk things over and 
come to a lasting peace. And so it is in the 
industrial world to-day. The so-called Capital- 
ist, the owner of the tool, and the so-called 
Laborer, the user of the tool, both seem ignorant 
of the man behind the bush, to wit, the owner 
of the land, or landlord, who, by raising rents 
and increasing royalties, and other charges for 
the use of land, is ever getting an increased 
share of the annual product at the expense of 
the Capitalist and the Laborer. For all that he 
gets and all that they get must come out of the 
total wealth product. Our labor leaders and em- 
ployers have been wasting too much time over 
little things like anti-injunction planks in party 
platforms. They must go after this stone 
thrower behind the bush. 

To illustrate, just briefly, how this share of the 
total annual product going to land as rent in- 
creases, let us take Manhattan Island, on which 
a part of the City of New York now stands. 
This Island sold for $24 in 1626, and a cube 
i-ioth of an inch high may be used to represent 



23 

its value then, while to-day, 1908, when its value 
is $2,712,216,571, it requires a cube four feet 
and one-half inch high to represent its value. 

A New York City lot at the corner of 42nd 
Street and 5th Avenue sold in 1867 for $47,000. 
The same lot sold in 1907 for $850,000, an in- 
crease in the value of one New York City lot of 
over $800,000 in forty years. If we take the 
$47,000, its value in 1867, and calculate its in- 
come then on a 7% basis (the interest rate at 
that time), we find that the share of the total 
product of the wealth created in 1867 going to 
that one lot was $3,290. If we calculate its 
income in 1907, on a 5% basis, we find that its 
share of the total product of that year was 
$42,500. With coal at $5 a ton, this lot received, 
as its share of the total product, 658 tons in 
1867, while in 1907 it received 8,500 tons. With 
wheat at $2 a bushel the value of this lot was 
23,500 bushels in 1867, and with wheat at $1 a 
bushel it was worth 850,000 bushels in 1907. 
This lot is simply a sample of New York City 
lots. Other lots show a much more rapid in- 
crease than this. Every city, town and village in 
the country will show increases in the value of 
its land. That is, the share going to the owners 
of the land in these cities, towns and villages in- 
creases as the years go by, if they are in the 
parts of our country where industries or farm- 
ing are carried on in their neighborhood. I need 
not give instances of increased values of land in 
our American cities. Every citizen can furnish 
instances of his own. I have seen in Portland, 
Oregon, business lots increase, during a boom, 
from $1,800 in one year to $40,000 the next. I 
have seen in Brooklyn, lots on 5th Avenue in- 
crease in one year from $1,800 to $12,000. Dur- 
ing the last boom, values of lots quadrupled in a 
single week in some parts of New York City, and 
our whole city for five years before the October 
panic of 1907 was boomed to an extent unpre- 



24 

cedented in its history. Probably no such land 
boom has ever been seen in the history of any 
city that man has ever built, and some people are 
trying to still further inflate what has already 
been carried too far. This boom was not con- 
fined to the City of New York, but all of our 
cities and larger towns experienced a real estate 
boom, by which rents were increased and land 
values marked up higher than they were before. 
From the Atlantic to the Pacific and from 
Maine to Florida there was some real estate 
boom, though in some parts of the country it was 
more intense than in others. 

The Brooklyn Eagle for May 13, 1908, prints 
this little story of "How a lot grew in value" in 
Pittsburg, Pa., the center of the iron and steel 
industry of our country: "Dr. Gregg," a Brook- 
lyn minister, "was left a lot in a choice location 
in Pittsburg, which his father had purchased for 
about $7,000. A few years ago the price of this 
$7,000 lot increased mightily in value, and under 
the careful business management of John Gregg 
it sold a few years ago for something like $150,- 
000." Nothing need be said about the alleged 
"management" by which this particular Pitts- 
burg lot was increased in value. The fact is, that 
Pittsburg, like other American cities, has had its 
real estate booms and this lot has been able in 
"a few years" to grow fat, to wit, from $7,000 
to $150,000 at the expense of the owners of capi- 
tal and labor in and around the City of Pittsburg. 
That city has gone through many labor riots 
(conflicts between Capital and Labor), and much 
damage has been done and property destroyed, 
for which the State of Pennsylvania, by taxing 
entirely innocent parties, has had to pay, yet 
the value of this lot and of all the others in the 
City, with perhaps a few exceptions, has "in- 
creased mightily," as the Eagle puts it. Men 
have been shot down in cold blood in the region 
tributary to Pittsburg for protesting, in the only 



25 

way they could, against the reduction in their 
wages to the starvation point, that this and other 
lots might so increase, and their employers have 
claimed that business was so poor and the mar- 
ket for their product so bad that they could not 
afford to pay better wages to their men. But 
neither the employer nor the employee paid any 
attention to the tremendous incomes being gath- 
ered by the owners of the Pittsburg lots, the 
men behind the bushes, that were throwing 
stones at both the employer and the employee 
while they were quarreling over the little that 
was left after the Pittsburg land-owner had 
taken his big bite out of the pie that Capital 
and Labor had together produced from the land 
in and around Pittsburg. This Pittsburg story 
is repeated in every city and town in the United 
States, only in a greater or less degree. The 
question is: What did the owner of this lot do 
that justifies such a tremendous increase in its 
value? How could his "management" cause the 
income of this lot to increase from $420 (on a 
6% basis) to $9,000 per annum? Had he been 
hunting lions and other big game in Africa the 
increase would have taken place just the same. 
And this lot is only one of many lots which 
had the same experience, as the Eagle story 
relates. I was born in Pennsylvania, and I have 
said many times to taxpayers and residents of 
that State that God Almighty had given them 
enough mineral wealth — coal, iron, oil, etc. — ^to 
build a college on every hill and to educate and 
feed every boy and girl born in the State at the 
State's expense and to give every one that gradu- 
ates $1,000 cash with which to start out in the 
world. But with Pittsburg lots growing in value 
as this one has it is to be expected that instead 
of education, peace and perfect prosperity in 
that State, among all its people, we should find, 
as we do in places, the densest ignorance, the 
deepest poverty, the most helplessly overworked 



26 

and cowed employees, to be found in any State 
in the Union, and I have traveled through nearly 
all of them with the purpose of observing the 
condition of their laborers. Out of the bowels 
of her bounty some 1,700 libraries have been 
built in this and other countries, but they all 
bear the name of the man who has profited more 
than any other from the ignorance and stupidity 
of the people of that great State. Poor Penn- 
sylvania! The manner in which her people 
have been sucked dry of their sustenance, robbed 
of their natural inheritance, by the millionaires 
of our great cities, who have for years exploited 
her while her so-called guardians have slept the 
sleep of the dead, will be a chapter yet to be 
written in the history of our country that shall 
make the blood of future generations run cold 
with horror. She taxes her anthracite coal lands, 
worth $30,000 an acre, at a few dollars an acre 
as though it was scrub oak land, with no value 
to it until the scrub oak shall grow up. What 
she gets in taxes out of her oil and iron lands no 
one knows, but Pennsylvania stands on the high- 
ways of the States calling out to be reformed in 
a louder voice and with greater excuse than any 
other State in the Union. She so neglects the 
taxation of her mineral resources that she must 
resort to a poll tax to get revenues to run her 
government. Again I say, Poor Pennsylvania ! 
But Pennsylvania is not the only State in the 
Union. She is merely one of the forty-six 
squares of the great Union checker-board on 
which the rent-wages-interest game is being 
played. How insignificant do the tariff question, 
the money question, the railroad rebate and other 
questions become in comparison with this vital 
question of the milking of our great natural re- 
sources for the benefit of the very few ! 



27 



CHAPTER IV 

HOW THE REAL ESTATE BOOM CRIPPLES BUSINESS 

The question now is : How does the real estate 
boom, which is the economic process by which 
the share going to land is increased, bring the 
panic? 

Let us suppose that a clerk, or a mechanic, in 
New York City, is getting $20 a week as wages, 
and that he pays as rent $5 a week. He then has 
$15 a week, after paying for his shelter, to spend 
on the avenue for furniture, clothing and pro- 
visions, and, perhaps, out of the $15, he may have 
a dollar or so for luxuries, like cigars for him- 
self, ice cream for his wife, or soda water for 
his children. This $15, which he spends at the 
store on the avenue, determines to a degree the 
amount of business which the storekeeper does; 
as well, the amount of business the various 
factories who sell to the storekeeper do; as 
well, the amount of labor which the em- 
ployees in both the store and the factory 
will have to do ; as well, the amount of busi- 
ness which the railroads and steamships and 
their employees will have to do. Now a real 
estate boom sets in, and the rent of the clerk 
or the mechanic, is raised from $5 a week 
to $7 a week. He then has but $13 of his $20 
with which to go to the stores on the avenue to 
buy. But the same real estate boom raises also 
the rents of the stores along the avenues at the 
same time it raises the rents of the clerk and the 
mechanic in the flat or tenement. To get back 
the increased rents which they pay for the 
stores, the shopkeepers on the avenue increase 
the prices of their goods, and we then begin 
to "enjoy" a period of what are called "high 
prices." Some politicians claim that as long as 



28 

we have high prices we will have prosperity. 
So we see that after the real estate boom has 
raised the rents in the flat and in the stores an 
entirely new condition obtains, to wit, that while 
the clerk and the mechanic under the increased 
rents, have less money in their pockets to take 
to the stores, they find, when they get there to 
buy, that prices are higher than before. This, at 
once, forces an economy in consumption on the 
part of these tenants whose rents have been 
increased, and this forced economy brings imme- 
diate under-consumption of the goods in the 
stores on the avenues, which re-acts upon the 
manufacturers, whose orders grow less, and we 
have then the phenomenon called "Over-Pro- 
duction," so apparent in every panic, and which 
over-production some people think is the cause 
of the panic. But this over-production is only 
another term for the under-consumption result- 
ing from the increased rents in tenements and 
stores brought about by the real estate boom. 
By the term "tenement" I mean every dwelling 
that is rented. 

But let us try an illustration, or a parable, as 
they were called in ancient times : A clothier in 
a town or city is keeping in a corner, or inside 
store, a large quantity of men's clothing. In his 
store window he has on display ten suits of 
clothes and on each suit is fastened a price tag 
of $io. There come to his window ten men, 
each having in his pocket $io and each wanting 
and needing a suit of clothes of the kind, descrip- 
tion and price of those on display in the window. 
Under these conditions the clothier has a splen- 
did chance to do business. But before they go 
in to buy, one of the ten men suggests that they 
go around the corner and play a game of poker. 
So they adjourn to a neighboring room and play 
poker for several hours, and then they all come 
around again and look into the clothier's window 
where the ten suits with the $io tags are still 



29 

on display. But after the game of poker, instead 
of each of the ten men having $io as before, 
one of them has $50, while the other $50 is dis- 
tributed among the other nine. Now, under 
these new conditions, the clothier in the store 
has not the same chance to sell his goods as he 
had before the game of poker. Before the game 
of poker each of the ten men could buy a suit, 
but after the game of poker, while one of the 
ten men can buy five suits, probably only one 
or two of the other nine can buy one suit, and six 
or seven of the ten men must abandon the idea 
of buying a $10 suit. But before the men go 
into the store to buy, one of them, hoping to 
win back his losings, suggests that they play 
some more poker, which they do, with the result 
that at the end of the second game one of the 
ten men has $90 of the original $100, and the 
other $10 is scattered promiscuously in the 
pockets of the other nine. It is evident that 
after the second game only one of the ten men 
can buy a $10 suit, and, while he has the money 
to buy nine suits, the chances are that he will con- 
clude that a $10 suit of clothes is not good enough 
for him and that he will go to another store and 
pay $50 for one suit. Now, the $50 suit does 
not require so much labor in the making, either 
in the original material or in the tailoring, as 
would the making of five of the $10 suits, and 
so the game of poker has worked disaster, not 
alone to the clothier, but to the tailors that make 
the suits and to the laborers that make the mate- 
rials in the suits, and to the business men all 
along the line. This, then, explains how the 
capitalist in the clothing business and the laborer 
who makes the clothes are thrown out of em- 
ployment, and, incidentally, how the owner of 
the store loses his tenant. 



30 



The Real Estate Boom a Grand Game of Poker 

A real estate boom is simply a grand game of 
poker on a larger scale. We need not take part 
in the smaller game, but the larger game is 
forced on us. Like the game of poker, the real 
estate boom, brought about largely by gamblers 
and speculators in land, simply concentrates 
the wealth of the many in the hands of the few. 
And while the few have more money to spend 
on costlier things, after the boom, the many are 
compelled to go without even the cheapest of 
products. When William Waldorf Astor, who 
visited us several years ago, gave his agent an 
order to raise his rents 20%, he increased his 
own income at the expense of 150,000 New York 
City tenants, who are all consumers of American 
products. Indeed, it seems, that the country 
from which he draws his immense revenues 
($10,000,000 a year, I am told) is not good 
enough for him to live in. But he is not the 
only one who increases rents after a period of 
business prosperity has set in. He simply sets 
the pace and the owners of the other large estates 
follow. The Astors, the Rhinelanders, the Goe- 
lets, the Lorillards, and the rest of the "400" in 
our American metropolis all raise their rents at 
the same time. That is, they raise their rents 
when the business prosperity enables them to 
ask more rent from the tenant. It is like setting 
out a pan of milk. When the cream rises the 
cat comes along and laps up the cream and 
leaves nothing but skimmed-milk. Another pan 
is set out and the cat again laps up the cream 
and leaves the skimmed-milk. And so we have 
periods of business prosperity in this country, 
when all our laborers are employed at steadily 
advancing wages, when all the rolling stock of 
our railroads is engaged in transporting or dis- 
tributing products, when every dollar in exist- 



31 

ence is out in circulation earning interest which 
comes back to its owner, when the spindles in 
the mills are running night and day and orders 
for goods are increasing and collections are 
prompt and credit good, and the cream which 
we call prosperity, rises to the top of the indus- 
trial milk pan. Then in steps the landlord, 
wherever he has a chance (and if he doesn't see 
his opportunity the real estate boomer will see 
it for him) and laps up the prosperity by increas- 
ing his rents in store, in loft, in office, in house, 
in flat, in tenement, and for vacant land which 
he leases to business men at enormous net rentals. 

The Business Man Has Not Yet Seen the Cat. 

In a city like New York only one per cent, of 
the population own land, while ninety-nine per 
cent, are rent payers, or tenants. But of the 
one per cent, who own land only i-ioth are rent 
collectors, the other 9-ioths being home owners, 
who are neither landlords nor tenants. When 
this one-tenth of one per cent, of landlords begin 
to gather in the wealth of our great tenant class 
by increasing the rents of the ninety-nine per 
cent, a panic, and the consequent business de- 
pression, is absolutely inevitable. If an English 
battleship were to sail up the harbor and demand 
$10,000,000 from the wealth producers of New 
York City under a threat to blow up the city, 
most of us would go crazy with fear and excite- 
ment, but when the "400" give the cider press 
another squeeze and get ten times as much, we 
simply smile and wonder why we have a panic. 
Some people, I think, would smile while having 
their throats cut, they are "so dead easy." 

When I read this last chapter to a fellow 
lawyer and told him that out of 125 tugs owned 
by the Pennsylvania Railroad in New York har- 
bor only 21 are in use (May 13, 1908), and that 
35% of the rolling stock of that railroad is idle 



32 

on the side tracks, and that this was all caused by 
our late real estate boom, which kept him very 
busy while it lasted, he said he could not see how 
the real estate boom here could have anything to 
do with the idleness of all these Pennsylvania 
tugs and cars. But when I told him that the 
boom in New York had its duplicate in Philadel- 
phia, in Baltimore, in Chicago and other cities, 
and that only one per cent, of the population of 
these cities were benefited by the increased rents, 
and that this benefit to the one per cent, was at 
the expense of and impoverished and reduced the 
purchasing power of the other ninety-nine per 
cent., he admitted that the consequent decrease 
in consumption among the millions of tenants in 
our great cities would cause such a shrinkage in 
business as to force the idleness of railroad 
equipment, laborers and money, such as we are 
now experiencing. 

CHAPTER V 

PURCHASING LOTS ON THE INSTALLMENT PLAN 

In addition to the disastrous effect on business 
of the increase in rents through the real estate 
boom, as hereinbefore set forth, and the conse- 
quent decrease in the purchasing power of the 
great tenant class in our centers of population, 
another practice is resorted to by many of the 
tenants themselves which operates further to 
reduce the consumption of products and to bring 
about over-production, as it is called, and the 
consequent idleness of capital and labor. I refer 
to the common practice, during real estate 
booms, of a large portion of the population pur- 
chasing vacant lots on the installment plan — 
"$io down and $5 a month," or on some other 
terms, either less or more exacting. Sales of 
vacant lots on the installment plan are adver- 



33 

tised very largely in all the papers of our cities 
and larger towns, and I have seen such adver- 
tisements in papers published in the smaller 
towns of the country. When a young man or 
young woman, with a weekly or monthly wage 
or salary, begins to carry one or more outside 
lots, which he has bought on the installment 
plan, that young man or young woman finds it 
necessary to economize in his or her purchases 
of the articles for consumption they have been 
previously accustomed to buy. I have known 
servants on $25 a month to pay $4 a week on 
vacant lots which some slick advertising agent 
or solicitor had induced them to buy, telling them 
stories of how lots on Broadway and Fifth 
Avenue in New York City have increased in 
value. In this world we cannot eat our cake 
and have it, too, and when we begin to buy 
Long Island sand or Seattle swamps on the in- 
stallment plan we are obliged to economize else- 
where; that is, as our money goes out for lots, 
we begin to save, first by denying ourselves the 
little luxuries and, later on, the necessaries. And 
when ten million consumers in the United States 
start in to practice such economy, while they are 
paying for lots, by installments, the storekeeper 
begins to complain of poor business and the men 
who trade in luxuries begin to go to the wall. 
The dealers in luxuries suffer first in the period 
of depression, and they are among the very first 
to fail. When one buys ice cream, soda, or 
cigars, or a magazine or paper, he gives employ- 
ment to those who produce such things ; but 
when he buys Long Island sand or New Jersey 
"fortune makers" on the installment plan he 
gives employment to no one, save perhaps a few 
selling agents, a surveyor and a plowman. Sand 
is already here; it was made by the Maker of 
all things aeons ago, and while our money may 
pass through such sand into the pockets of the 
speculators, developers and operators in sub- 



34 

urban real estate, that money does not make 
the wheels of industry go round. Such buying on 
the installment plan has the same result in wealth 
concentration as has the increasing of rents by 
the larger estates, to wit, it puts the money 
of the many into the pockets of the few, for 
generally one or two men, or a small syndicate, 
buy up the acreage which is "developed" into 
lots and sold on installments to the innocent 
and unthinking thousands in the cities and towns 
of our country. My advice to the young man 
or woman, who is tempted to buy a lot on the 
installment plan, is, DON'T. About 90% of the 
people who buy lots in this way lose all the 
money they have put into them, and lose the lots, 
too. Before many of the installments are paid 
the panic overtakes the purchasers, and through 
a reduction in wages or the partial or total loss 
of employment they are unable to keep up their 
installment payments and so they fall behind and 
lose both their money and their land. I have 
been told by responsible real estate men that the 
same land on Long Island has been sold on the 
installment plan three times over, each set of 
installment purchasers having dropped out after 
making part payments. I have also seen whole 
pages of newspaper advertisements of tax sales 
of lots that represent installment purchases aban- 
doned by their purchasers. The mere matter of 
gross waste connected with a land system that 
permits such things is serious enough for 
thoughtful consideration. 

If the young man wishes, at some time or 
other, to buy a lot for the purpose of having 
a home, let him put his savings in the savings 
bank where it will draw interest, and he will find 
ere long that he will have enough money to buy 
a lot and pay cash for it. By this plan he will 
get his lot much cheaper, for the installment 
plan always inflates prices, while, if he waits, 
he can buy the same lot, or one just as good, at a 



35 

much lower figure, for the reason that when the 
boom bursts and those who have purchased on 
the installment plan are obliged to let go, the man 
who has waited can step in and get a lot for less 
than half — sometimes for one-tenth — of the in- 
stallment plan price. If he deposits his savings 
in a bank it will not only bear interest for him, 
but the bank will loan it on bond and mortgage 
to the bona fide builder, who improves the land, 
and who thus gives employment to the laborers in 
the building trades. 

I am not writing this book, however, for the 
purpose of giving advice, but merely to get my 
readers to think, and after they have thought 
out the problem I am now presenting they prob- 
ably will need advice from no one. They will 
have learned through the disastrous ravages of 
the boom to let land severely alone until they 
wish to buy it for immediate use or improve- 
ment. If they do not put their spare cash in the 
bank they will spend it for the products of the 
farms, factories and mills, and this spending will 
give employment to their fellow workingmen, 
who will reciprocate by giving employment to 
them ; and steady employment, with high wages 
and short hours, and time for leisure and change 
is all there is to prosperity for the workingman. 

I would like also to say to the business man : 
Never invest any of your surplus capital in 
vacant land. Put it out on bond and mortgage, 
or erect buildings, but don't encourage the hold- 
ing of land out of use. Thousands of business 
men have failed because they tied up their money 
in vacant land and could not get it out when most 
needed. Business men should also consider that 
it is not to their interest to "beat down wages." 
Business prosperity depends far more upon good 
wages than upon good crops or good laws ; and 
5% on a million dollar business equals 20% 
on a business of a quarter million. The sec- 
tions of our country through which run the rail- 



36 

roads that pay the best wages are always more 
prosperous than the sections through which run 
the roads that pay the lowest wages. The grow- 
ing intelligence of our railroad managers of 
economic conditions has no better illustration 
than their endeavor during this 1907 panic to 
keep up the wages of railroad employees. 

Employers of labor everywhere should encour- 
age labor unions and combinations to keep wages 
from falling, and all laborers and labor organi- 
zations should strenuously resist the efforts of 
legislators to cripple corporations and other em- 
ployers by compelling them to perform services 
at rates that will not enable them to pay good 
wages, good dividends and accumulate reserves 
for further extensions. The employer and em- 
ployee, with a common end in view, should work 
harmoniously together. 

We must remember, too, that if all public 
service were performed for nothing it would sim- 
ply increase the value of land, by increasing 
rents, instead of benefiting the general public. 
If wages increase and railroad rates increase, 
it will mean only that the unearned increment 
in the inflated value of city lots must decrease. 



CHAPTER VI 

THE TROUBLE NOT OVER WHEN LAND BOOM 

CEASES 

But let it not be thought that when the real 
estate boom is over the business trouble has 
ceased. Far from it. It has only just begun. 
When Mr. Astor raised his rents 20% he did 
not raise them for one month or for two months, 
but for twelve months in every year, and this 
increased burden, which Mr. Astor has laid 



Z7 

upon his tenants (and the other large estates have 
done Hke him) must be carried by the business 
men even after the land boom has passed and 
gone. As the months go by the business man 
finds that business gets no better, but his rent 
stands at the prosperity figure. He then begins 
to "cut down expenses" by laying off part of his 
help and overworking the other part, but with- 
out avail. Sometimes he closes up his business 
before it gets too late; sometimes he waits, still 
hoping, and then makes an assignment; some- 
times he commits suicide, to be done with it for- 
ever. But while he stays in business the relent- 
less rent collector of the big estate will visit 
him monthly or quarterly and take from him the 
increased rental tax which the estate has put 
upon his business. 

Before the panic of 1884 I used to lunch, after 
school hours, at a little French bakery on Third 
Avenue, near Columbia College. It was a very 
nice place to get a good cup of coffee, with some 
French cake or pie, or other dainty, and I went 
so frequently that I became very well acquainted 
with its proprietor, a Frenchman who had moved 
here from Paris. Near the ist day of May, 
1883, he came to my table, as usual, to have a 
little chat, and I found that he was looking very 
glum. When I asked him what the trouble was 
he told me that the agent of the landlord (a 
large New York estate) had come in and told 
him that his rent would be raised $2,000 a year 
after the ist of May. He then said to me 
that he would have to discharge the girls who 
had been waiting behind the counters and at the 
tables and take his own daughters out of school 
and put them in their places. The business men 
in all the stores along the street that belonged 
to the same estate had a like experience. At 
this same time I was boarding in a big brown 
stone row on West Fourteenth Street between 
Seventh and Eighth avenues. The agent of the 



38 

landlord called on the boarding-house keeper 
and notified him that his rent would be increased 
from $2,400 to $3,600 a year. The boarding- 
house keeper proved that he had been a good and 
careful tenant, having been prompt in his pay- 
ments and having made all the repairs, so the 
agent let him off with an increase of $1,000 a 
year, or $83.33 ^ month. All the boarders were 
called into the parlor soon after and the rent 
situation was explained. The result was that 
he raised the board of each of us and then he 
fed us less than formerly. How else, pray, could 
he make up the $1,000 a year, which this estate 
took out of his receipts? The house was not 
enlarged so that it would accommodate more 
boarders, nor was it beautified in any way so 
that it would attract a better class of boarders. 
For the same old house in the same old condi- 
tion the additional $1,000 was exacted. The 
owner of this property did not live In the United 
States, but it would not have made much differ- 
ence to his victims if he did. At the same time, 
also, the Astor estate owned a building at No. 10 
Wall Street, in New York City, known as the 
Schermerhorn Building. The old building was 
torn down and a new one erected, in the year 
1885, I think. But in the old building a well- 
known broker had several offices, or rooms, for 
which he paid to the Astor estate $3,500 a year 
rent. The rent for these rooms was increased 
to $10,000 a year, I was told by a gentleman 
connected with the inside workings of the Astor 
properties, who also said that the Increased rents 
for one year of the old building at 10 Wall 
Street furnished enough money to put up the 
new building that was afterward erected In its 
olace — not the total rents for one year, but the 
Increase In the rents for one year. Business In 
Wall Street, and all over the country, was very 
brisk at the time and of course the brokers 
^ould afford to pay more rent for their offices, 



39 

and the big estates, always on the job, and in 

like manner as during previous periods of busi- 
ness prosperity, came in and made them pay. 
Rents went up all over New York City, and all 
over the country just about this time, and a 
great boom in real estate was on, and the panic 
of 1884 came post haste. 

Just before the recent 1907 panic one of the 
Astor women rented her Fifth Avenue house for 
$50,000 net per annum more than she ever be- 
fore received for it. The Zabrowski estate, 
which has its headquarters in Italy, recently 
rented a small piece of ground on Broadway 
near Fifty-ninth Street, for $75,000 net per 
annum. By *'net" is meant that the tenant i3ays 
all taxes, assessments, etc. This particular piece 
of land the Zabrowski estate bought thirty-five 
years ago for $36,000, so that now it receives 
over 100% on its investment every six months. 
But 200% per annum is a poor income for first- 
class Manhattan real estate. Some of the Astor 
property yields an income far above 1,000% per 
annum on its cost to that estate — all of it com- 
ing out of the business men of the country. 

During the late boom, lots in my own neigh- 
borhood in Flatbush, Brooklyn, have increased 
in eight years from $300 to $4,000, a small part 
of which increase, of course, is the result of 
street and other improvements. And men there 
are asking for twenty-foot lots ten times as much 
as they paid for an acre of land a few decades 
ago. Any one who expects business prosperity 
to continue with these added rent burdens 
placed upon it is certainly an optimist. But 
our optimists have not yet learned that land 
lives off of business and that excessive rents 
and good business cannot exist together. A 
delicatessen man in my neighborhood says that 
he must go out of business ; that people who a 
year ago brought from $14 to $20 a month to 
his store are now bringing but $2. The keeper 



40 

of a small gents' furnishing store near by took 
in $240 in August, 1906; while last August he 
took in but $80. His customers are paying 
higher rents, or installments on vacant lots, and 
they can't buy haberdashery as they did before. 
While the barber who shaves mt says that his 
little shop takes in $25 a week less than it did 
during the boom. The country storekeeper 
knows that when the circus comes to town his 
business is poorer because the circus gets the 
money. 



CHAPTER Vn 

THE BUILDING BOOM A GOOD THING 

I do not wish my readers to think that when 
I talk about the real estate boom I am criticising 
the building boom. Not at all. He who makes 
two blades of grass grow where only one grew 
before is a blessing, and so is the builder of 
houses, stores, factories, hotels, theaters, rail- 
roads, etc. And he who improves land in any 
way should not only be encouraged but praised. 
The State should so encourage these improve- 
ments as to exempt them from all taxation. 
But in these days a man can't whitewash his fence 
or paint his shutters without running the risk 
of being punished for it. I am inveighing against 
the vacant lot, filled with stones, weeds, tin cans, 
dead cats, etc., and the system that discourages 
its improvement and against the large tracts held 
by speculators in the suburbs of our cities and 
towns. 

The builder gives employment to more kinds 
of laborers and mechanics, perhaps, than any 
other employer. He first calls in the lawyer, 
then the surveyor, then the architect, then the 
cellar digger, then the mason, then the carpenter 



41 

or bricklayer, then the plasterer, roofer, stair- 
builder, the tinner and plumber, the painter and 
decorator and finally the gardener and the in- 
surance agent. God bless the builder, for he 
seems to be at the bottom of things. But the 
builder of houses not only gives employment 
to laborers, craftsmen and professional men; he 
also provides homes for the people. We have 
not nearly enough homes. In the City of New 
York people live like pigs in a sty, crowded 
together like sardines in a box, while all around 
in the outskirts is sufficient vacant land to house 
comfortably every family, if we could only put 
the builder and his thousands of helpers to work. 
Some years ago, in New York City, we found in 
an old-fashioned house four families living in 
one room, a family in each corner, while they did 
their cooking on a stove in the middle of the 
room. And one of these families had a boarder. 
The congestion just now is so marked because 
of recently increased rents ($8 and $9 tene- 
ments having gone up to $19 and $20 a month 
and $2,500 apartments to $3,500 a year), that 
in some of the tenements on the East Side of old 
New York City half of the family occupy the 
bed until midnight, when they get out and let 
the other half occupy it until morning — and all 
this in the civilized City, which we call the 
metropolis of our civilized country. 

But the land, or real estate boom which I am 
talking about, gets in the way of the builder 
and puts him out of business and all his helpers 
out of work. The speculation in vacant land and 
suburban lots in the neighborhoods where the 
builder is making his improvements gets so brisk, 
during the boom, that the builder finds that lots 
cost so much that he must increase the cost of his 
houses in order to get back his money. The 
increased cost of houses acts like the increased 
cost of anything else, it lessens their sale. When 
silk sells at $1 a yard a certain portion of the 



42 

community can buy silk, when it goes up to $2 
a yard a much smaller number can buy it. At 
50 cents a yard the sale of silk is ten times as 
great as at $2 a yard. So with houses. A lot 
at $500 to the builder, on which he erects a 
$4,000 house, will sell at from $5,000 to $6,000. 
When the lot is boomed to $3,000 the same house 
must bring from $8,000 to $10,000. And, as the 
prices rise, the sales become less, until a time 
comes when the builder's sales are so infrequent 
that he stops building any more houses, indeed 
he lets many stand only half completed. He then 
lays off his men, when thousands upon thousands 
are thrown out of work. If these new houses 
were kept down to $5,000 they would "go like 
hot cakes," just the same as silk at 50 cents a 
yard. An express train may make fifty miles an 
hour through two inches of snow, twenty miles 
an hour through four inches, and ten miles an 
hour through a foot of snow, but it will come 
to a dead stop when the snow is four feet deep. 
So it is with the builder of houses. He comes 
to a dead stop when the cost of lots is so high 
that he cannot find customers to buy at the neces- 
sarily high prices. The disemployment of the 
men in the building trades, brought about through 
this increased cost of lots, affects at once the tens 
of thousands in other callings and trades from 
whom the building tradesmen get their supplies. 
This again affects and disemploys still others, 
and pretty soon we are confronted with our old 
friend, "the tramp," who is simply a man thrown 
out of work by causes of which he is as igno- 
rant as are most of our college professors. The 
railroads suffer loss of business when building 
materials are no longer needed for houses in our 
cities and towns. 

After the business boom, or period of pros- 
perity, has been swallowed up by the real estate 
boom, the real estate boom itself comes to a 
stop. After land, which lives off of business. 



43 

has killed or checked business (the goose that 
lays its golden eggs) it stops its booming, and 
a great many of those who have been booming 
real estate find themselves out of employment, 
so that men who once earned fifty and sixty 
dollars a week selling lots on big commissions 
begin to sell tea and coffee from house to house, 
lead pencils, safety razors, etc., on small com- 
missions, while a great many live on their friends 
or on the credit which they established during 
the palmy days of the boom. A few of these 
boomers also commit suicide or go crazy, not 
knowing what the trouble is. I speak thus 
plainly out of my sympathy for the real estate 
boomer, so that he may see that he is his own 
greatest enemy and that by booming land he 
shuts off the possibility of his making an hon- 
est and decent living at anything else. The 
law of supply and demand does not apply to 
land. If we could build a ladder to the moon 
we could escape the land boom pressure, but 
there is only so much land, and while man may 
increase all kinds of products when demand 
requires he must get along with what land God 
has seen fit to give him. 



CHAPTER VIII 

WHAT IS RENT? 

I have said that the term rent is applied to 
the share of the total product of wealth which 
goes to land. By rent I do not mean, as the 
lawyers do, any income that buildings or im- 
provements on land yield, but simply the income 
that the land itself yields. The income from 
buildings and improvements, speaking econom- 
ically, is interest. So, too, the Income from land 



44 

improved by filling in, leveling, draining, etc., to 
the extent of such improvements. 

It will be seen at once that when rents go up 
in our cities it is not an increased revenue from 
the buildings, but from the land under the build- 
ings. This explains why the older a building 
becomes in a city the more valuable it, with the 
site on which it stands, becomes. Temporarily, 
of course, the income from a building, through 
increased cost of labor and of building mate- 
rials, may be increased, the same as the income 
of a hired wagon may be increased, but this is 
simply an increase in interest, not in rent. 

This term rent, then, is restricted to those 
incomes which are derived from the property 
which man has not made, but which is fur- 
nished by nature, and which we sometimes refer 
to as the resources of a country. When Mr. 
Rockefeller took his score or more of millions out 
of the United States in one year, he got much of 
it by selling to us and to others the raw mate- 
rial — crude petroleum — in the earth, which I 
have included in my term land, and which crude 
petroleum his company turned into kerosene for 
our lamps and gasoline for our automobiles ; but 
it is the earth which yields part of this vast in- 
come. When Mr. Carnegie draws $28 a minute 
out of the total product of the wealth produced in 
this country he gets most of it by simply selling 
the coal in one side of a mountain, the iron in the 
other side and the timber on the top, all part 
of the earth, turned into steel. If the Nazarene 
Carpenter could have lived until now and had 
begun to save $1 a day from the time He was 
born, 20 centuries ago, He would not yet have 
$1,000,000, nor three-fourths of a million. Yet 
the incomes of these two men run into millions 
because of the ownership of vast tracts of coal, 
oil and iron ore lands by the corporations in 
which they own stock. The people who own 
the anthracite and bituminous coal lands, the 



45 

gold, silver and copper mines, the stone quarries, 
the clay deposits, the water powers, etc., and 
whose incomes are sometimes beyond the dreams 
of avarice itself are merely rent receivers whose 
wealth comes out of the land — the natural re- 
sources of the country. Our State governors 
were told lately by the President that these re- 
sources should be preserved and conserved, as 
they belong to the people, but no one suggested 
how this property of the people is to get into 
the hands of the people. I shall tell how later on. 

The Farmer Is Not a Rent Receiver 

Now I do not wish to have it understood that 
the farmer is the receiver of rent. He has a 
hard enough row to hoe without being classed 
with our rent receivers. He raises potatoes, 
wheat, apples, stock, etc., and sells them. Nearly 
all of what he gets for his crops is wages for his 
labor in raising and reaping his crops. Part of 
it is interest for the capital which his houses, 
barns, wagons, horses, etc., represent. If his 
farm be near a good market the value of his land 
will be greater than the same kind of land far- 
ther away from the market, and this difference 
in value is capitalized rent. The tenant farmer, 
who farms on the shares or for a fixed sum, pays 
rent for the use of farm land and interest for 
the use of the buildings and other improvements. 

Rent is what one man pays to another for liv- 
ing on the earth, or for something in the earth. 
What one man gets by selling to another the 
blessings which God intended for all of his 
children. This rent Is squeezed out of labor 
and capital, that is, out of business. It cannot 
possibly come elsewise. Rent reduces the pur- 
chasing power of those who pay it to a mini- 
mum so that the vast majority of the population 
of the earth, after paying their rent, are In a 
continuous state of poverty. In the towns and 



46 

cities they pay so much rent for shelter that 
they have httle left for furniture, clothing and 
provisions, to say nothing of luxuries. Rent is 
the progenitor of poverty. Rent is the income 
which enables the "400" in our cities to give 
dinners to dogs and monkeys, while their ten- 
ants, who pay the rent, scarcely know where 
their next meal is coming from. The real es- 
tate booms in our cities and towns simply 
increase rent, or the incomes of those who own 
land, at the expense of those who do not own 
land. This, as I have shown, is what brings the 
panic and causes the periods of business depres- 
sion with which our country has become so 
familiar. According to the United States census 
of 1900, 306 of our cities contained 22,500,000 
of the total population of the country. Of these 
306 cities each had a population of over 14,000; 
and at this date they probably have a total popu- 
lation of 30,000,000. 

Now, it will be said that rent depends upon 
business, and that a good business can afford 
to pay a good rent, etc. Just so, and the large 
apple will yield the most cider, but why should 
the business man pay so much of his income 
for rent to one who has not contributed at all 
to the prosperity which the business enjoys? 
When th^ business man has his rent raised, he 
both raises the price of his goods and reduces 
the salaries of his clerks to meet the exactions 
of his landlord. And if an increased business 
would seem to justify an increased rent, why 
does he not keep the prosperity for himself and 
divide it up among his customers in lower prices 
and his employees in higher wages, instead of 
handing it over to his landlord, who gives him 
nothing in return for the increase in the rent? 
Why, if you own your home and pay no rent 
for store or office, do you pay such exorbitant 
prices for coal, oil, gasoline and the other earth 
products ? 



47 

Rent may also be likened to the governor on 
an engine, which regulates the speed of the 
machinery of an entire factory. When the 
machinery runs too fast the governor shuts off 
the steam from the boiler, which lessens the 
speed; when it runs too slowly the governor 
admits more steam, which increases the speed. 
Consumption of products is the steam which 
runs business. Consumption depends upon pur- 
chasing power, and purchasing power is what 
our consumers have to spend after they have 
paid their rent. When they begin to consume 
in large quantities and we have business pros- 
perity, the real estate boom sets in, and, by in- 
creasing rents, reduces their purchasing power,, 
which curtails their consumption and cripples 
general business. Many business men believe that 
confidence is the mainstay of business. It is 
not. Consumption of products, not confidence, 
is what makes business possible, and confidence 
is only shaken after consumption has been les- 
sened by the real estate boom and the increasing 
of rents. This is why a real estate booni is 
always bound to bring a panic. The boom acts 
like an automatic shut-off on business; throt- 
tles it. 

The Small vs. the Large Landlord 

A great many of the smaller landlords will 
resent this apparent attack on them and will 
claim that the real estate held by them brings in 
a small income and that such income is at times 
very irregular, while in the very worst periods 
the income is almost entirely cut off because of 
the poor tenants and the fact that some of their 
property stands idle for long periods. With 
all of this I agree fully. And I maintain further 
that the landlord, who builds on and improves 
his property, is entitled to io% income on his 
investment and I am sure that very many of 
our small landlords — those who own two and 



48 

three family houses, and some of the smaller 
tenements — would be glad if they could get a 
steady io% income from their property. But 
these smaller landlords are often eaten up by 
the larger estates, like those of the Astors, the 
Rhinelanders, the Lorillards, the Goelets and 
others. These big estates own the property in 
those business sections of our cities that must 
be used for business while there is any business 
to be done, and, when they increase their rents, 
they are in a position to dictate terms to their 
tenants. When they place a rental upon a store 
or building, or a vacant lot, to be built upon by 
the tenant, they stick to that price until they 
get it, for the reason that their other real estate 
holdings are so large that they can afford to do 
what the smaller landlords find it impossible to 
do, to wit, hold until they get their price. So 
the property of the large estates in the business 
strongholds of our cities has the power to suck 
dry the values of the smaller landlords in other 
parts of the city. By putting a straw in the 
center of a plate filled with a half inch of water 
and by sucking on the straw one can raise the 
water in it to ten inches above the level, but by 
so doing the level of the water all over the plate 
will be reduced. So the real estate boom acts 
finally upon the small landlord. The straw of 
the big landlord, which sucks exorbitant rents 
out of his tenants and raises the values of his 
property into the millions, lowers the rents in 
the suburbs and causes the small landlord to 
take much less income on his investment than 
he could get if all his rooms were filled by ten- 
ants who are prosperous, in that they have steady 
employment at good wages. This may seem to 
be a contradiction of my argument against high 
rents, which contradiction would invalidate my 
argument that real estate booms, by raising rents, 
bring our panics. But it is not. For a few years 
the small landlord, under the stimulus of the 



49 

business boom, will get a higher rent for his 
flats or stores, but this increased rent is only 
temporary. The forces operating to reduce his 
rents, as I shall show later, take from him, in 
loss of rentals through poor payments and vacan- 
cies, more than he gained by the temporary in- 
crease. He would be much better off with a 
steady 10% gross income, lasting throughout 
the year for many years, than to get 25°/, for 
one or two years out of ten and 3% or 4% for 
the other years. The conservative landlord, who 
gets a fair rental all the year round, is in a bet- 
ter general condition than he who wants all that 
he can get, but gets that only for a short time. 
The same force that compels the small land- 
lord in the cities, and the suburban property 
owner, to take for long periods smaller incomes 
on their property operates to compel the smaller 
cities of the country to yield up a share of their 
income to the owners of the inside property in 
the larger cities. The tremendous land values 
and high rentals in New York City drain all the 
towns and smaller cities for hundreds of miles 
around. These high rents come out of the busi- 
ness of the country generally, as well as out of 
the local business ; and the general business can- 
not pay it twice. So that if New York City is 
in a position to compel business to pay the rent 
tax to New York, other places, in which part of 
the business is done, must yield gracefully to 
New York. The same rule applies to Philadel- 
phia, to Buffalo and Pittsburg, to Cleveland, to 
Chicago and St. Louis. The values of land in 
each of these cities are made up partly by 
the smaller cities and towns contributary to 
them. The millions that Hetty Green gets out 
of Chicago real estate are not paid to her by 
Chicago tenants solely. These Chicago tenants 
are mere collecting agents for her. Her great 
income from Chicago rents is made up by peo- 
ple who live and do business in Omaha, Denver, 



50 

Kansas City and St. Paul; by the farmers and 
laborers of Ohio, Illinois, Michigan, Wisconsin, 
Iowa and other States. From every bushel of 
wheat and every barrel of pork that passes 
through Chicago something is taken to swell 
the incomes of the big Chicago landlords. The 
big cities are simply the business clearing houses 
of the smaller cities of the country, and the 
smaller cities are business clearing houses of the 
towns and villages surrounding them; and while 
we find that some rent is collected in the vil- 
lages, towns and cities, for the use of land 
therein, all of these contribute to the big rents 
that are gathered by the owners of land in the 
larger cities, which are the main centers of the 
production and distribution of wealth. There is 
a sort of tug-o'-war going on in business at all 
times and the stronger and more advantageously 
situated cities have an advantage over the weaker 
and less advantageously situated, so that the 
larger fortunes, founded on real estate holdings, 
are in the big cities, which are the strongholds 
of business and commerce, to wit, of the pro- 
duction and distribution of wealth. 

Before closing this chapter let me call atten- 
tion to the fact, which may otherwise be over- 
looked, that the incomes from suburban and 
small city property are made up far more of 
interest on the improvements than of rent for 
the land ; while in the larger cities the reverse is 
generally true, the inside land in the latter nearly 
always being more valuable than the improve- 
ments. So that when suburban property de- 
creases in value, as it invariably does, after the 
real estate boom has spent itself, the improve- 
ments, which are capital, depreciate in earning 
power just the same as does the rolling stock 
of a railroad, or the machinery and buildings of 
our factories. 

The great terminals and the rights of way of 
our railroads, irrespective of the buildings, are 



51 

land, and the income which our railroads derive 
from this part of their property is rent. It may 
be, therefore, that an old-established railroad, 
which purchased its terminals and right of way 
when land was cheap, may thrive and pay some 
dividends while its more modern rival, which 
has paid high prices for its right of way and 
terminals, will go into bankruptcy. The West 
Shore foreclosure sale illustrates this proposition. 
And the "Reading" Railroad, under the presi- 
dency of McGowan, went into bankruptcy 
through buying rights of way and terminals at 
enormous prices in the cities and towns of Penn- 
sylvania. And doubtless this is the trouble with 
Mr. Gould's Wheeling & Lake Erie, which is 
now in the hands of a receiver. 

The Inflation and Watering of Stocks 

Lest my argument be construed as being too 
narrow in its scope, I degire to say that the real 
estate boom manifests itself outside of what may 
be included in the land in our cities and towns. 
For what is often paid as dividends on stocks 
is no different in character, speaking economi- 
cally, from what is paid as rent for the use of 
land. The property of many of our corporations 
Is made up very largely of land — coal land, iron 
land, gold land, terminals, water powers, etc. 
— and bonds, secured by mortgage on this land, 
are issued by the corporations, while shares of 
stock are issued to represent the equity in 
the land above the mortgage. While the inter- 
est rate on the bonds is fixed by the terms of 
the bond and mortgage the dividends on the 
shares are not so fixed. The interest on the 
bonds and dividends on the stock of a cor- 
poration, whose principal asset is land, are 
partly rent, and during prosperous times, when 
there is a great demand for raw material — fuel, 
lime, timber, etc, — which comes directly from 



52 

the earth, these dividends, through increased 
prices for such raw material, may increase enor- 
mously, and their increase is not a whit different 
from the increase in rents for the use of land in 
our cities ; and such increases in dividends tend 
to bring the panic and business depression, for 
the higher prices spell decreased consumption 
and poor markets. The Waters-Pierce Oil 
Company of Texas, a sub-company of the Stand- 
ard Oil Company, paid dividends of 684% per 
annum. 

The redeeming feature about dividends is that 
the stock is generally largely distributed, and 
wealth distribution is the great desideratum. 
The stock of the land-owning corporation being 
widely distributed the increased dividends do 
not affect general business so much as if the 
mines, timber tracts, oil wells, etc., are owned 
by a very few — the concentration of wealth being 
much less in the former case than in the latter. 

So it would be if half of the population of a 
city were land-owners. Increased rents would, 
in such case, be taken from half of the popula- 
tion and handed over to the other half, and the 
other half, enjoying an increased purchasing 
power from the increased rents, would go into 
the market and probably consume as much more 
than usual as those who pay the increased rents 
would consume as much less than usual. But 
in New York City, where it is claimed that out 
of a population of 4,000,000, only 100,000 are 
home owners, the balance being tenants, the in- 
crease in rents produces a concentration of 
wealth which at once deals business, that is, 
production and distribution, a staggering blow. 
When I speak thus of New York City I have in 
mind, of course, other cities of the Union. 

It is claimed that 100,000 owners of American 
property live in Europe, and derive such tre- 
mendous incomes therefrom that large exports 
of American products are made annually to sat- 
isfy their constant drain upon this country. 



53 



CHAPTER IX 

THE GRADUAL RETURN OF PROSPERITY 

The periodicity of our panics teaches us that 
hard times do not last always and that busi- 
ness will get better at some time. But I do 
not wish to be understood as saying that either 
capital or labor has yet enjoyed real prosperity. 
Land, of course, has. When business will get 
better is a matter of speculation among many 
present writers on economic subjects. Some 
said that business prosperity would return after 
the late Presidential election, others that it will 
come after liquidation goes a little further, others, 
after we have a better currency system, etc. 
As this panic does not differ in any respect from 
any of our previous panics, and as it has been 
brought about by the real estate boom, as were 
all of our other panics, predictions as to how 
soon prosperity will return are useless, but it takes 
a long while for the elements which constitute 
good business to settle down again after a land 
boom upheaval. Much depends upon the area 
over which the land boom has spread, and much 
upon the intensity of it. 

Last March on Worth Street, between the 
Bowery and Broadway in New York City, were 
hundreds of men huddled together on the side- 
walk with newspapers over them trying to keep 
warm while sleeping through the night, and 
yet this mockery which we call civilization, 
sometimes Christian civilization, is unable to 
find enough work for such men to provide a 
lodging for them in a cheap lodging-house. 
The "400" come high, but it seems we must 
have them. 

But we have had like conditions in former 
panics and it is more than likely that we shall 



54 

have more of such trouble before prosperity 
again shines upon us. But prosperity will cer- 
tainly come again, and will as certainly depart, 
unless we lay our plans to hold her the next 
time she comes. The question now is : What 
will bring the return of prosperity? 

The Expansion and Contraction of Population 
in Our Great Cities 

We all know that our cities grow in popula- 
tion and that very few of our American towns 
show any decrease in population. It is not so 
well known, however, that the population of a 
city, independent of its numerical growth, may 
expand and contract like a piece of rubber. Four 
millions of people may occupy to their fullest 
extent one million buildings, during a period of 
business prosperity, while, during a period of 
business depression, these four millions of peo- 
ple may crowd themselves into a half or a quar- 
ter million of buildings and let the other half 
or three-quarters lie idle, or unoccupied. Busi- 
ness prosperity is cotemporaneous with steady 
employment and good wages. At such times of 
prosperity those who have occupied two rooms 
move into five, and the five-room people move 
into eight, while the eight-room people move into 
houses of the smaller type, and the occupiers of 
the smaller houses move into larger houses, 
which the builder is erecting to supply the de- 
mand made by the expansion of population 
resulting thus from prosperity, that is, from 
steady employment and good wages. Of course, 
I assume that when employers can give steady 
employment and good wages their business is 
so good that they get well paid for their labor 
of superintendence, and good incomes or in- 
terest from the capital invested in their business. 
Prosperity is confined to no class when business 
is good; it is only confined to a very small 



55 

class when business is bad, as I shall show later. 
After the real estate boom has had its run, 
and has petered out through self-exhaustion and 
because the business upon which it feeds and 
grows fat has been sucked dry, and business 
prosperity has been killed by it, and millions of 
people have been thrown out of employment, 
a period of the strictest economy sets in imme- 
diately. Those who have suffered decreases in 
their wages and salaries, move from their eight 
rooms back into five rooms and the five-room 
tenants get back again into one room, a part 
of which they are often compelled to share in 
order to get revenue enough to pay the rent 
demanded for it. As the incomes of the custom- 
ers at the stores on the avenues grow less 
through disemployment, or decreased wages, 
many of the storekeepers are driven out of busi- 
ness and close up and leave their stores vacant. 
As the more prosperous business man, who has 
purchased a large house from the builder in 
the newer sections of the city, finds that his 
business is getting poorer and that he must make 
sacrifices he puts his house on the market, while 
many others are forced to sell their homes be- 
cause they cannot make their interest payments 
after the forced reduction in their salaries or in- 
comes. All of this cruel and avoidable readjust- 
ment, by which thousands of families lose their 
homes and all their savings, increases the num- 
ber of houses that are offered for occupation. 
At these times the "TO LET" and "FOR 
SALE" signs are seen all over the city, in houses, 
in flats, in tenements and in stores. And when 
these have hung out for a long while, for month 
after month and year after year, business pros- 
perity begins to gradually return. 

When the "TO LET" sign is out for a long 
while the landlord, confronted with taxes and 
necessary repairs, is in a mood to negotiate with 
a possible tenant at a much lower rent than 



56 

formerly. Competition among landlords for 
tenants brings rents away down, and every dol- 
lar less that the tenant pays for rent increases 
his purchasing power just the same as if his 
wages had been raised that much. During this 
period of readjustment high-priced houses, empt); 
for years, are sold, land and all, at thousands 
of dollars less than the real value of the house,, 
and other real estate goes hunting for purchasers 
at bargain-counter prices, while the ''VACANT 
LOT INDUSTRY" has gone clear out of busi- 
ness, as no one has thought of buying vacant 
lots for years. 

During this change in real estate conditions 
business begins to get its feet again and times 
get a little better, orders for goods begin to 
multiply and collections are somewhat easier, 
while business failures show marked decreases. 

In a city like New York, and in all our cities 
and towns, however hard the times, and how- 
ever many men and women are out of employ- 
ment, there are always hundreds and thousands 
at work, for there must be a certain amount of 
coal distributed in the city, a certain amount of 
bread made and milk marketed, and a certain 
amount of clothing, furniture and provisions sold 
among those who are at work, while the street 
car men, the policemen, postmen and firemen 
are always employed. When the reduction in 
rents comes to those who have been employed 
right through the business depression, and when 
prices of all kinds of commodities come down 
again because store, warehouse and factory 
rents have taken a big drop, and decreased con- 
sumption has helped to bring lower prices, we 
find then a new condition, the exact reverse oi 
that when the clerk or mechanic, while the real 
estate boom was on, went to the store with less 
money in his pocket to find that things cost 
more than before. Now, his rent having been 
reduced, he goes to the store with more money 



57 

in his pocket to find that things cost less, and 

he begins to increase his purchases at once, and 
the more he increases his purchases and en- 
larges his consumption along with all the others, 
the more idle men and women he and they thus 
put to work in supplying their demands. In this 
way more people get wages than before, and 
these again begin to buy at the lower range of 
prices and they again call into employment more 
and still more of the idle, until, after a while, we 
have all of the unemployed again at work, and 
all at a reduced rent for the tenements they 
occupy, and all getting goods cheaper than be- 
fore because of the decreased rents in the stores 
and elsewhere. 

During this period of re-employment of the 
idle laborers new businesses spring up and old 
ones revive and all kinds of production and dis- 
tribution are benefited, so that business men, as 
they are called, begin again to enjoy prosperity. 
A year or so of this goes on until the entire 
country is aflame with business prosperity, and 
wages go up, and employment not only gets 
steady, but the mills run night and day to fill 
orders, while millions come here from other 
shores to do the rough work necessary to be 
done in a growing country like ours. We soon 
find Messrs. Hill and Harriman complaining 
that they cannot get enough cars and locomo- 
tives to handle the business offered, and we hear 
dreadful stories of how the freight gets blocked 
and piled up in the great centers of distribution, 
to wit, the freight depots and wharves of our 
important cities. 

Then, while in the enjoyment of this pros- 
perity, the two-room tenant begins to look for 
five rooms, the five-roomer gets into seven, the 
seven-roomer, who has been able to save a lit- 
tle money, hunts a small house, and the small 
house man, having a chance to sell his home on 
good terms, buys a larger house, while the 



58 

builder, with all his various forces, is busy 
supplying the demand for houses of a growing 
and expanding population, filled to the brim 
with what we call prosperity. 

Also, at this time, the land gambler, of all 
gamblers the very worst, comes on the scene; 
the real estate offices begin to multiply like fly 
specs, and the speculator and operator begin to 
buy improved property and to increase rents, 
and the big estates, urged by their walking del- 
egates, the real estate agents, who collect rents 
on commission and are thus interested in high 
rents, begin raising rents lest any of the pros- 
perity shall escape them. So, while the business 
prosperity is expanding, the rents begin again 
to advance all round, and land begins to boom 
as before, until prosperity is eclipsed once more, 
when we finally come again to the next panic, 
with its breaking of banks, its period of suicide, 
of forced idleness, of loss of confidence, etc., etc. 
It takes about ten years to complete the cycle, 
but it is always traveled in just the way that I 
have described. 

So if I should say that the "PANIC" is a very 
easy thing to understand you might compre- 
hend why I think it so easy. 

All one has to do is to wait until the 
"BOOMER" gets on the field and REAL 
ESTATE OFFICES begin to multiply, and to 
watch how rents are going up, and how this man 
and that man have made big money out of this 
piece of land and out of that corner lot, and how 
some old, unkempt and ignorant farmer near a 
big and growing city has made a fortune by sell- 
ing his farm to a syndicate of developers, who 
are selling it on installments through page ad- 
vertisements in the daily prints, etc., etc., ad 
nauseum. These are "the signs of the times." 
By them we can tell that the panic is on the way, 
because all of thi^ brings high rents to the great 
tenant class, with consequent decrease in the 



59 

purchasing power of that great class, and with 
decreased purchasing power we must have de- 
creased consumption of the products of _ labor 
and capital, which to the producers and distrib- 
utors of wealth spells HARD TIMES. 

At this time sell the market short. 

If, when Mr. Astor raises his rents 20% on 
his 150,000 tenants, he would go into the stores 
and buy the furniture, clothing and provisions 
that his tenants would have bought if he had let 
them alone; or if he would buy as many auto- 
mobiles, or as much jewelry or ice cream as 
they would have bought if his agent had not 
brought them the depressing news of an increase 
in their rents, all would have gone on smoothly 
and nothing would have happened to the busi- 
ness of the country. But Mr. Astor does not do 
this, nor do the other members of the "400" 
after they have made their periodical raids on 
their tenants. Mr. Astor may buy a fine Euro- 
pean picture for $50,000, or some Roman or 
other antiquities at enormous prices, or he may 
buy another English estate at fancy figures, or 
spend a million per annum on an English regi- 
ment, but his expenditure in such ways of the 
money he gets out of his American tenants does 
not make the wheels of industry here in America 
go round. His purchasing power has been in- 
creased enormously by his increase in his rents, 
but his consumption is not increased in pro- 
portion. By increasing rents he has deprived 
tens of thousands of people of the power to 
purchase and consume the very things that help 
to make business healthy, but he does not visit 
the stores and make good to the dealers what 
they lose in sales when his tenants begin to stay 
away or stop buying. His consumption is at a 
maximum before he increases his rents. 

The owners of the other estates do the same. 
They may indeed spend $25,000, or more, for 
butterflies at the "coming out" of their daughters, 



6o 

but the butterfly industry in this country is not 
even important enough to interest the micro- 
scopic eyes of our high tariff advocates. Butter- 
fly consumption, with the other forms of riot- 
ous Hving of those who simply Vv^allow in wealth 
after the real estate boom has increased their 
rents and brought business paralysis and starva- 
tion to men, women and children, does not go 
far in bringing back a departed prosperity. 
Prosperity comes back only when the great ten- 
ant class (99% of the population of New York 
City) begin to feel the effects of a lower rent 
scale, which is soon followed by a higher wage 
scale because of the prosperity of their employ- 
ers, who find business gradually getting better. 
Even a swell dinner by Hetty Green, given to a 
few swell people at a swell hotel does not coun- 
teract the effect of the decreased consumption re- 
sulting from the increased rents of her Chicago 
tenants. 



CHAPTER X 

MONEY AND THE BANKS 

To write a pamphlet on PANICS and say 
nothing in it about money, or our banking sys- 
tem, would surprise, if not offend, many of my 
readers. 

A great many people claim that our panics 
come from a bad monetary system, while others 
pour their vials of wrath upon the bankers and 
blame them for all our trouble. A recent publi- 
cation on the subject of PANICS is filled with 
diatribes against our bankers, saying that when 
they get scared they hide all of their good money 
away, and then withdraw all of their credit 
money, which brings a shrinkage in the circulat- 



6i 

ing medium, and that this is followed by the 
panic. The writer does not tell us why the 
hanker gets scared. Everything goes along 
smoothly until the banker gets scared, and then 
something else happens for which the banker is 
blamed. BUT WHAT HAS SCARED THE 
BANKER ? Why does the lender of money haul 
in his horns and cease to extend his credits? 
Let me answer. 

Why the Bankers Get Scared 

So long as the customers of the banker come 
to the bank and take up the notes discounted by 
the banks when they are due, the banker is will- 
ing to further extend his loans. But there comes 
a time when the merchant or manufacturer 
comes to the bank and says that he cannot take 
up his note, as he had expected; and, when the 
banker asks what the trouble is, he tells him that 
his sales have fallen off, that orders are not com- 
ing in as fast as before, and that his collections 
are not as good as they were, and that because 
his customers do not meet their obligations to 
him he cannot meet his obligation with the bank. 
This little tale of woe, told to the banker by hun- 
dreds or thousands of his customers, is what 
"puts the scare" into the banker. But neither 
the banker, nor the merchant, nor the manufac- 
turer knows what is the cause of the poor col- 
lections, the falling off in orders and the les- 
sened sales of which the merchant and manu- 
facturer complain. I have already told the 
reader how the real estate boom, by increasing 
rents and through installment sales, has been 
gnawing away at the purchasing power of the 
customers who formerly consumed the goods 
handled by the merchant and manufacturer. 
When both of these operations in real estate 
have affected the merchants and manufacturers 
so that they have scared the bankers, the bankers 



62 

at once change their policy of freely loaning 
their money or their credit. 

The banker will tell you that CREDIT is based 
on two things, first, the ability to pay, and, 
second, the willingness to pay. These two qual- 
ities in the borrower pass current at almost any 
bank. But when the merchant or manufacturer 
becomes unable to pay, however willing he may 
be, the bank stops lending. And the bank never 
lends money to the man who is unwilling to 
pay his debts, however able he may be to pay 
them, after it once discovers that he is unwilling 
to pay. 

Bank Failures Merely Incidents of the Boom 

Before I complete this chapter I wish to ex- 
plain how it is that so many banks fail, just 
before the period of depression sets in. The 
bank failures, to some minds, are what constitute 
the panic, but they are simply incidents of the 
boom which brings the panic. Let me explain 
why the banks fail. 

At least ninety per cent, of our business is 
done on credit, that is, without the direct use 
of cash. Most of the merchants doing business 
in localities where banking facilities are avail- 
able borrow money, or credit, at the bank with 
which to carry on some of their business. That 
is, they unite their own capital with that of the 
banker, and with this money or credit they do 
business. The banker loans his capital on the 
note of the merchant, for thirty days, sixty or 
ninety days, or probably six months. When the 
loanable capital of the local banker becomes ex- 
hausted, by loans to his merchant customers and 
other business borrowers, he can replete his 
treasury by borrowing money on his customers' 
notes, w^ith his endorsement, from some stronger 
bank in a larger business center. And this 



63 

Stronger bank, when its loanable funds run low, 
may borrow money from a still larger bank in 
a still larger financial center. So, to illustrate, 
we find that a little business man, doing busi- 
ness in a city like Portland, Oregon, may find 
that his note, which his Portland bank dis- 
counted for him, was sent by his bank to Denver, 
and that the Denver bank later sent it to Chi- 
cago, and that later the Chicago bank sent it on 
to New York as collateral to loans which one 
bank makes to another in the line of banks. 

Now Portland is not the only city which does 
business in this way. Other cities and large and 
small towns do business in the same manner, 
and their banks send the notes of their mer- 
chants on to larger banks in larger cities, which 
again send them as collateral to still larger banks 
in still larger cities, so that cities like St. Eouis, 
Chicago, Philadelphia and New York get loaded 
up at times with the paper of both small and 
large merchants and manufacturers throughout 
the United States. When the real estate boom 
strikes the towns and cities, whose merchants 
have discounted their notes at the local banks, 
their business, as I have explained, is so crippled 
by the boom that they cannot take up their notes 
when due, and the local banks cannot take them 
up from the banks that have taken them as col- 
lateral, and, as the banks that are loaded up with 
these notes cannot get them cashed when they 
are due, they run short of money and cannot 
pay demands made upon them by thefr deposi- 
tors. That is, their depositors' money is being 
used to carry the notes of the merchants and 
manufacturers in the towns and cities of the 
United States, and when these depositors get 
pinched for money through poor collections, and 
want to use more of their deposited money than 
usual their banks, being short of money, cannot 
cash their checks, and so the bank closes up, 
shuts its doors, "suspends," as we say. 



64 

When an examination of the assets of the 
suspended bank is made we are told that it is 
"loaded up" with worthless paper, to wit, the 
unpaid notes of all these business men in our 
cities and towns. And this is true. But all this 
"worthless paper" would have been perfectly 
good, and would have been met and taken up 
by the business borrowers when due, had not 
the real estate boom interfered with the con- 
sumption of the articles handled by the mer- 
chants and manufacturers whose paper lies un- 
paid in the broken banks. This interference 
with their business I have already explained. 

By our modern Clearing House systems we 
have fewer bank failures than formerly because 
the strong Clearing House banks, by lending 
their credit to the weaker ones, tide the weaker 
banks over the period of currency shrinkage. 
Yet for all this we have too many bank failures. 



A Frequent Cause of Bank Failures 

Another reason why the banks fail is worthy 
attention. And this reason is still more closely 
connected with the real estate boom than the 
reason I have just set forth. 

Many banks and bankers are inveigled into 
loaning money on vacant land itself. That is, 
banks and bankers finance the syndicates which 
are formed to boom real estate and corporations 
with real estate or land bases, and they put, not 
only their own money into these schemes, but 
the money of their depositors as well. 

A syndicate buys a farm near a city, say for 
$i,ooo an acre from a farmer. The farmer 
takes a small payment in cash (which is gener- 
ally far more than he ever expected to get for 
his farm) and a large mortgage for the balance. 
It is then "developed" by the syndicate, that is, 
the farm is surveyed, laid out into streets on a 



6s 

map, is staked into blocks and lots, the plow is 
run through once between the stakes to show 
where the streets are to be. (Very often many 
transfers of the property take place between the 
sale by the farmer and the purchase by the devel- 
opers, each transfer being at a profit to the sell- 
ers.) Some lots are then sold by the "develop- 
ers" on the installment plan. Perhaps a house is 
built here and there. The price of lots is then 
raised and still more are sold. Finally lots are 
sold back and forth among the friends of those 
who are in the syndicate, just for the purpose of 
getting prices up, like ''Wash Sales" on the 
Stock Exchange. Eventually the price of the 
land is "marked up" to say $10,000 an acre. 
The banker is then approached for a loan on 
the "Beautiful Plot." "The scheme," the syndi- 
cate tells the banker, "is to pay off the old farm- 
er's mortgage, to improve the streets and sell 
the lots all out at higher figures to still more 
installment buyers." The property is some- 
times advertised in newspapers that take lots in 
exchange for advertising, and glowing editorials 
are written advising the innocent to get on the 
band wagon as the land boom is on the way. 
And this, by the way, is the meanest part of 
the whole newspaper business. The early 
installment buyers at this stage are not ready 
to sell their purchases, as they have not yet paid 
enough money to the syndicate to get deeds for 
their lots. Well, the banker, often a jolly old 
soul, generally "a retired business man," sends 
out his appraiser to look over the plot that is 
offered for the loan. The appraiser reports 
back that sales have been made at the rate of 
$10,000 an acre, and, finally, the bank loans its 
depositors' money on this land to the extent of 
$7,500 an acre. Now, when the syndicate has 
"cashed in" at $7,500 an acre what they bought 
for $1,000 an acre, their interest is likely to lag, 
and they cease to boom their "Treasure Island" 



66 

as they formerly did. They move on to newer 
fields to repeat the operation, for land booming 
has become a sort of profession, and is carried 
on after the manner of the card sharps on our 
ocean steamers. 

Or, if they keep on advertising their lots, they 
discover that sales fall off, or are not what they 
anticipated, the purchasers having gone else- 
where, or become tired. Anyway, the sales of 
lots stop, the syndicate's obligation at the bank 
is not met when due, and the depositors, who 
call for their money at the bank, find, some fine 
morning, a sign: "THIS BANK CLOSED BY 
ORDER OF THE BANK EXAMINER," etc., 
etc. 

So that dozens of banks may fail by this 
method of working the real estate boom on the 
banks. The Knickerbocker Trust Company's 
President committed suicide when his bank 
failed. It was found that he was "loaded up" 
with vacant property over in Nutley, N. J., and 
in the upper part of Manhattan Island. When 
the Borough Bank of Brooklyn closed its doors, 
it was found that it was carrying "Beautiful 
Hollis Park." 

Banks fail all over the Union, and good men 
and women, whose money has been deposited in 
them, die of broken hearts because they have 
lost the savings of years. But very few of them 
know that their losses are directly attributable 
to the real estate boom, which they perhaps en- 
couraged, and which, as I am claiming and 
trying to prove, is the cause of our panics, and 
the periods of business depression which follow. 

Among those who protest loudest against the 
"runs on the banks," made by the scared de- 
positors, are the men who have been booming 
real estate the hardest, and" who have piped from 
the housetops the tompletion of every addi- 
tional foot of subway or bridge. Every little 
improvement or contemplated improvement is 



67 

used by these boomers to make rents and land 
values higher and to make still more miserable 
the lives of the tenant class. When, 25 years 
ago, the Elevated railroad car fare in old New 
York was reduced from ten to five cents, there 
was such a real estate boom in Harlem at the 
upper end of Manhattan Island that ordinary 
rents were increased ten dollars a month. Just 
lately we had a three days "Jamaica Celebration" 
over the opening of a subway, but the little 
children that marched in the parade and threw 
flowers in the path of our Governor will suffer 
pangs of hunger and many heartbreaking disap- 
pointments because of the land boom the gam- 
blers have tried to perpetrate. For they and their 
children must pay the dividends on the water 
which these boomers are pouring into the land. 



CHAPTER XI 

CAN CURRENCY REFORM PREVENT PANICS? 

At this juncture it may not be amiss to dis- 
cuss briefly the question whether panics can be 
prevented by any of the proposed measures for 
currency reform. 

When Congressman Waldo, in March, 1908, 
addressed a Brooklyn audience on the various 
methods proposed in Congress for the reform 
of our currency, I told him that in six months 
the currency question would cease to be a mat- 
ter worthy of serious consideration, and that it 
would not again be pressed for consideration for 
five or more years, as the millions of idle dollars, 
which would for years lie in our bank vaults, 
would solve the money question, just as the idle 
men tramping the country would solve the 
scarcity of labor question, and as the idle cars 



68 

and locomotives on the side tracks of our rail- 
roads would solve the car famine problem. 
After this date the call loan rate went down to 
I % per annum, and idle money poured in to the 
Wall Street banks from their country customers 
at the rate of $10,000,000 a week, while railroad 
earnings in the United States decreased at the 
rate of $300,000,000 per annum. Idle money, 
idle men and idle cars and factories go together, 
and this idleness is the very reverse of prosper- 
ity. Some Wall Street economists ( ?) are re- 
joicing at the way the dollars are piling up in 
the vaults of the Wall Street banks. As well 
might President McCrea, of the Pennsylvania 
Railroad, rejoice over the fact that 35% of the 
rolling stock of his railroad has been idle, and 
that out of 125 tugs owned by his road in New 
York Harbor only 21 are working, as for the 
banker to rejoice that his money is lying idle. 
We have in New York City to-day 200,000 men 
out of work, but no one is rejoicing, not even the 
employers of labor, for they are learning that 
when they are obliged to pay high wages they do 
more business and have more money with which 
to pay the high wages than they have to pay low 
wages when business is bad. 

But no form of currency reform can cure 
panics any more than the gold standard or a 
larger output of gold can effect a cure. When 
the air brakes are set you cannot move your 
train by pouring oil into the axle boxes. No 
whistling of the engine, or ringing of the bell, 
or swinging of lanterns, will avail. The brake 
must be released! High rents are the brake, 
currency is simply the oil, and legislation the 
whistle and the bell. 

Currency reform would merely increase the 
volume of currency at the times when money 
gets scarce, but such relief would simply act 
like the playing out of more line to accommo- 
date the fleeing bass on one's hook ; or the length- 



69 

ening of one's kite string as his kite flies higher. 
More currency would cause higher prices for 
land, still more inflation, and would simply en- 
able the speculators to blow more w^ater and 
wind into their little schemes than they could 
raise otherwise. Emergency currency will al- 
ways have a new emergency to meet, to wit, the 
boom, for what is issued to meet one emergency 
will be swallowed up by the demand for its use, 
and the resulting scarcity will simply call for 
more currency. The money of the world may 
be likened to a rubber bag enfolding a balloon. 
When the balloon is inflated the rubber bag 
breaks. We patch up the breaks and inflate the 
balloon still more. Still more breaks occur, 
which must also be patched up, and while these 
patches enlarge the rubber bag the inflation 
underneath always taxes the bag to the bursting 
point. When business is carried on at a certain 
tension with given prices the money will suffice, 
but when business increases and values increase 
the money gets scarcer and scarcer and, at times, 
breaks in spots. Then CLEARING HOUSE 
CERTIFICATES are called into use to cover 
the break or patch up the puncture. An increase 
in the volume of money would simply act upon 
business as would the increasmg the size of the 
balloon under the bag, so that the rubber will 
always be getting thinner and thinner, and when 
business is brisk will break at spots and require 
still further patching. Money scarcity is like car 
scarcity and labor scarcity, and while laborers, 
cars, and money keep on increasing, still they 
will all, during good times, get scarce ; for busi- 
ness grows by what it feeds upon. 

Now, the real estate boom has all to do with 
making money scarce, and the remedy for 
scarce money can be brought about by punctur- 
ing the inflation that we see all around us in the 
land values in our cities and towns. Let the 
banks that can loan on real estate confine their 



70 

loans to legitimate real estate building, and they 
will then have more funds for the manufacturer 
and merchant. 

When silk sells at 50 cents a yard, so much 
money will be required to do the silk business 
of a community ; when it sells at $2 a yard it will 
require much more money to do the same 
amount of silk business. When building lots 
in a community are selling at $500 each, so much 
money will do all the business of the community ; 
but when the real estate boom runs the same lots 
up to $3,000 each, it will require a great deal 
more money to do the same amount of business, 
just as it will require more cars to handle the 
traffic of a railroad whose business has doubled. 
"Money is a measure of value," and more value 
always requires more money to do the measur- 
ing. 

Money gets scarce in Wall Street, largely be- 
cause it flows from stocks to land in New York 
City; that is, from the Stock Exchange to the 
Real Estate Exchange. The land syphons 
money out of the business of our country as a 
sponge soaks water out of a plate, so that, while 
inflated land values require vast sums of money 
to carry through the deals in them and the im- 
provements on the inflated land, the business of 
manufacturing or merchandizing finds it difiicult 
to get money for its legitimate purposes. The 
only remedy for "Monetary Stringency," as it 
is called, is to keep the land from swelling up so 
much in value, and by increasing the circulating 
medium as the population and the commerce of 
the country increase. 

A while back Mr. Harriman was publicly cen- 
sured for having poured, as it was claimed, 
$40,000,000 of water into Chicago & Alton, 
even President Roosevelt joining in the cen- 
sure. But the water poured by Mr. Harriman 
into Chicago & Alton is hardly a drop in the 
bucket compared with the water that has been 



71 

poured into Manhattan Island Real Estate dur- 
ing the past five years. It does not make much 
difference how much water is poured into Chi- 
cago & Alton, for the reason that no railroad 
company can compel the people either to ride 
or to ship their freight over its road, water or no 
water, nor can one railroad alone raise the rates. 
So all must "water" to hurt the consumers. But 
it is quite different with land. We are not so 
independent of land as we are of railroads. 
Man is a land animal and must constantly use 
land. When he eats, sleeps, works, walks, or 
rides on the cars, he is using land. If the own- 
ers of land in our cities, that is, in the centers 
of distribution, wish to pour "water" into their 
land and make their tenants pay them dividends 
in higher rents upon that "water," it will be dif- 
ficult for the tenants to escape, for if they try to 
escape they will find that it is like jumping from 
the frying pan into the fire, that all the land- 
owners work in concert, and that "water" is 
poured into the land all over, and that rents to 
pay the dividends on such water are advanced 
in every quarter at about the same time. If a 
man does not wish to patronize the watered rail- 
road he can go by automobile or carriage, or he 
can walk. Before long he can fly. But if a 
man does not wish to pay the exorbitant city and 
town rents he can only move into the mountain 
and there live free of rent. In the mountain, 
however, he will probably starve, for land that 
can be had free of rent in this country is land 
upon which no man can keep himself, let alone 
raise a family. Excepting for its influence in 
making money scarce "stock watering" is not 
so bad if passenger and freight rates are not 
increased. Of course, an increased business 
would permit of lower rates, but the laborer is 
always worthy of his hire, and a good business 
corporation, producing or distributing wealth, is 
in a sense a laborer. With its increased earn- 



72 

ings it can raise wages and make improvements 
and extensions, which should always be encour- 
aged. And we must never forget that a rail- 
road is a very large consumer of products, as 
well as employer of labor. 



CHAPTER XII 

TRUSTS GOVERNMENTAL AND BUSINESS 

ROTTENNESS 

I wish to present an aspect of "the trust 
question" which seems not yet to have been sug- 
gested. These gigantic business and industrial 
combinations seem to me to be the logical out- 
growth of the constant increase in the value of 
land in the centers of consumption. 

A trust, properly managed, should effect 
great economy in production and distribution, 
with lower prices to consumers, and greatly 
increased consumption and general prosperity. 
In and of itself the trust is not an evil. There 
is no good reason why two or a dozen sets of 
managers or superintendents should be employed 
in production and distribution when one set can 
do the work equally well. In these days of tele- 
phones, stenographers and typewriters one man- 
aging head can handle as much business as 
could ten men a quarter of a century ago. But 
the real estate booms by increasing the rents 
which business men pay, and which the custom- 
ers of the business men pay, necessitate such 
economy in production and distribution as will 
enable business men to do business, that is, to 
live, under the increased burden of higher rents. 
To meet this increased cost of doing business, 
and the consequent and necessary readjustment, 
combinations are formed and needed economies 



73 

effected. Then, again, when the rent of the ordi- 
nary consumer, the employee, is increased his 
purchasing power is weakened or decreased; 
and business must force a lower range of prices 
in order to meet this enormously reduced pur- 
chasing power of the great multitude. This 
necessity for lower prices is generally met by 
reducing wages, by laying off employees, and by 
forced reduction in the price of the raw materials 
which go into manufactured articles. But in the 
long run, and aside from these methods, econo- 
mies are partially effected by the business com- 
binations which we call trusts. If the natural 
resources, or land, were not already monopo- 
lized, the trust, like the labor-saving machine, 
would be a great blessing to mankind. But, 
like the labor-saving machine, the trust, instead 
of being a blessing to mankind, simply increases 
the value of land in the cities and towns, and 
only those who own such land and the mines, 
forests, water powers, etc., are benefited. The 
non-land owner is in nowise benefited. Thos^ 
who inveigh so vehemently against the trusts 
should remember that the trust, like the tramp, 
is simply the economic product of our land sys- 
tem — a system which allows one man and his 
heirs to own the earth forever, and charge the 
rest of mankind for living on it. 

Business dishonesty, and governmental, or 
political rottenness, are likewise products of the 
same system. Some business men, who take up 
collections in churches, not only prevaricate in 
and about their business, but claim, without fear 
of contradiction, that it is impossible to do busi- 
ness on an honest basis. The modern business 
motto is, we are told, "What can I do you for?" 
All this business dishonesty is superinduced or 
made possible by our land system, which through 
ever increasing rent, is crowding the business 
man to the wall. The business man's deception 
and tergiversation are simply weapons with which 



74 

he beats back the forces seeking with colossal 
effrontery to crush the business life out of him. 

As for the modern politician, whose crooked- 
ness is so much complained of, he is only 
another "victim of circumstances." For our 
land system is the evil tree upon which grows 
all our minor evils. Modern politics is conceded 
to be a game in which the aggressively honest 
man has about as much chance as the proverbial 
snowflake. He can only get into politics by a 
sort of miracle, and, when discovered, he is 
hustled out instanter, unless he ceases to be 
honest, and plays the game according to its 
rule of addition, division and silence. But this 
political rottenness, fast sapping the foundations 
of our government and our civil liberty, is treated 
largely as a sort of joke, and the few who are 
caught in the game are looked upon as "good 
fellows gone wrong," simply. 

Crime and insanity, according to the statistics, 
continue to increase much faster than our popu- 
^lation; some claim three times as fast This, of 
course, is to be expected under ever increasing 
difficulties of making a living. And it may be 
very seriously questioned, with all our boasting, 
whether ignorance is not also increasing. To 
keep "hammering in" things that are untrue, 
under the name of education, but illustrates the 
saying of the greatest of all teachers : "If the 
light (knowledge) that is within you is darkness 
(ignorance) how great is that darkness!" We 
teach almost everything in our public schools 
but POLITICAL ECONOMY, the science of 
the production and distribution of wealth; and 
the very few who reach the economic course in 
our colleges are filled with a lot of trash that, 
as we look upon the horribly inequitable distribu- 
tion of wealth in this country, may be illustrated 
by another of the same teacher's sayings : "By 
their fruits, ye shall know them!" And by still 
another: "The poor ye have with you, always." 



7$ 

The workingman, the professional man, the 
business man, all good citizens, all parents with 
children looking forward to opportunities for 
making decent and honest livelihoods, should be 
mterested in this question of wealth distribu- 
tion. WEALTH DISTRIBUTION is by far the 
most important question affecting human exist- 
ence to-day. If A were the landlord of B, and 
C were the landlord of D, the rent question 
would not be so important politically and econom- 
ically, because what A gets from B and what C 
gets from D in increased rents would be spent 
by A and C in the ordinary business course, but 
when A is the landlord of B, C, D, E, F, and all 
the rest of the Alphabet, the increased rent which 
A gets effects a concentration of wealth which 
cripples the . consumptive powers of all the rest, 
and this crippling process spells poverty and 
eternal grind for them, while it means untold 
riches and wasteful luxury to the few who col- 
lect the rents and royalties. Workingmen, busi- 
ness men and professional men live by employ- 
ing one another through the consumption of one 
anothers' products, but when three-fourths of 
one's product is taken away as rent without giv- 
ing any equivalent the power to exchange prod- 
ucts is very materially lessened, and lessened ex- 
change of products is HARD TIMES. 

A few of us may, here and there, make a lit- 
tle money by gambling in land, but we do it at 
the risk of losing far more than we make; and, 
besides, we close up to ourselves and to others 
the opportunities for making what all of us must 
make, to wit, a living. If we will only stop land 
gambling, and real estate booming, we shall 
have prosperity and opportunity for all who are 
able; and those who are unable, through natural 
defect, will be taken care of gladly by those who 
are able. Is not this "A CONSUMMATION 
DEVOUTLY TO BE WISHED?" Our pris- 



ons, soup houses, poor houses, bread Hues, and 
armories would then soon become things of the 
past. 



CHAPTER XIII 

WHAT IS THE REMEDY FOR THIS BUSINESS 

TROUBLE? WHAT IS THE CURE FOR HARD 

TIMES? 

A remedy that will cure land monopoly, includ- 
ing the monopoly of our natural resources, will 
at once cure all the business trouble that can 
come to this or any other country. 

Land is, and always has been, the natural 
employer of labor. With monopolized land 
opened to labor the wage question would solve 
itself at once, for the product of good land ob- 
tained free, or at a nominal price, will always 
yield enough in exchange to reward its tiller ; and 
wages elsewhere must always be as high as the 
tiller of the soil can get for his labor after pay- 
ing all his fixed charges. 

It is the same with the forests, the fisheries and 
the mines. They must be rescued from the 
grasp of monopoly. Monopoly also extends to 
land in the cities where thousands of acres of 
building lots are held out of use by the large 
estates and by syndicates of speculators and by 
individuals who are gambling for a rise. 

A very recent publication says this of William 
E. Harmon, one of the firm of Wood, Harmon 
& Co., extensive real estate speculators in vari- 
ous cities of the United States: "After Brook- 
lyn became consolidated with Manhattan" (old 
New York City), "Mr. Harmon invested several 
thousands of dollars in farms in this section, for 
he saw that there would be a wonderful future 
for Flatbush" (one of the old towns consolidated 



71 

with the old City of Brooklyn). "To-day he 
controls over 20,000 lots, exclusive of houses, 
business structures and office buildings. It is 
said, on good authority, that he could to-day" 
(December, 1908) "dispose of his holdings at a 
profit to himself and his firm of $20,000,000." 

Twenty thousand vacant lots will hold ten 
thousand American homes with sunshine, fresh 
air and flower beds around them. The city of 
New York to-day is showing a very expensive 
tuberculosis exhibit, which demonstrates that 
our filthy tenements almost bereft of fresh air 
and light, are the hot-beds of tuberculosis and 
other diseases. Is it not apparent that Mr. Har- 
mon is as great an enemy to society as John D. 
Rockefeller, and that his operations call for far 
more investigation and correction? 

Vacant lots in the Borough of Brooklyn, City 
of New York, which used to be known as the 
"CITY OF CHURCHES" and of homes, are 
sold to Japanese in Japan and to people who live 
West of the Rocky Mountains and in States 
other than that in which the land is located. So 
that unborn Brooklyn babies will pay unborn 
Japanese babies for the privilege of living on 
the earth here in Brooklyn. When my great- 
grandfather fought with George Washington in 
the Battle of Long Island, he certainly did not 
foresee this, and I am not at all reconciled to 
it myself. But at some future day we may be 
shipping to Japan large quantities of merchandise 
and gold, as we do now to Europe, to square 
her rent account against us, and then we will 
foolishly boast of our favorable balance of 
trade with Japan. The Brooklyn Eagle stated 
recently that one Brooklyn firm had sold $40,000,- 
000 worth of Brooklyn lands, and it has fre- 
quently been stated that this firm has sent 
over $6,000,000 of profits to Pennsylvania specu- 
lators in Brooklyn land. These profits represent 
"water" poured into this land, on which future 



78 

occupants must sweat to pay dividends. But all 
the outside syndicates are not prosperous. A 
Pennsylvania official writes me of a syndicate in 
his town which bought $150,000 worth of Brook- 
lyn land, paying half cash and giving a mortgage 
for half. Some of the members borrowed the 
money to make up their cash subscriptions. The 
mortgage is now overdue, and foreclosure is 
threatened, while the cash borrowed is loudly 
clamored for but can't be raised by the speculative 
borrowers. My informant says that a number 
of similar syndicates were formed in his town of 
12,000 people. The land boom is now over, but 
much of the suffering is yet to come. How to 
stop this land speculation by non-residents is one 
question. And how to get rents down to a nor- 
mal level is another question. 

We can pass laws that no man shall control 
any more land than he is actually using. 

We can enact that anyone finding a city lot 
vacant and out of use for one year may go 
thereupon and improve that lot, and his title will 
be protected by the State. 

We can compel a man holding vacant land out 
of use for more than one year to get an order 
from the court to enable him, for good excuse 
presented in his application, to hold it out of 
use for any longer time, provided he is a citizen. 

We can prohibit non-residents from owning 
land within the State. 

We can pass a law limiting rents as we have 
already limited interest rates and railroad fares, 
and hours of labor. 

We can say to the owner of an office build- 
ing, of a house, of a factory, of a hotel or of a 
block of apartments : "You have spent so much 
for the land upon which your building stands 
and so much for the improvements. We will 
allow you to collect in rents ten per cent, of your 
investment, which will include ordinary repairs, 
and if, after ten years or at any time, you wish 



79 

to overhaul or make extraordinary repairs we 
will let you add that cost to your original invest- 
ment and collect ten per cent, on that also." 
With such a limitation in rents every office build- 
ing, house, factory, store, hotel and flat would 
have on the door of the apartment to be rented, 
where the tenant could see it, the rental price 
per month for that apartment, or building, and 
above this the owner could not charge. 

Limiting rents would force the wealth, which 
land now takes as RENT from the shares of 
capital and labor, to be distributed between the 
owners of capital and the owners of labor as 
INTEREST and WAGES. And as the income 
of capital in many lines, especially those enjoy- 
ing a franchise or special privilege, is already 
limited, excepting by increased business, the 
share going to labor, after rent is limited, 
would be so tremendously increased that pros- 
perity would come to the working and profes- 
sional classes immediately, and with the in- 
creased consumption of all kinds of products 
that would follow the increased purchasing 
power of the laborers and others who receive 
wages, prosperity would come to the business 
man. The industrial pie would then be cut so 
that one piece, rent, would not be continually 
growing at the expense of the other two pieces, 
wages and interest. 

And the day must come when the land boomer 
shall be treated by society as it now treats the 
rabid dog, or the crazy man, with a gun. For 
he is, unconsciously, society's greatest enemy. 

put the same results may be obtained through 
taxation as can be obtained by limiting land 
ownership or limiting rents. We can throw the 
entire burden of taxation upon the rent received 
from land, and thereby relieve all industry and 
wealth, all business, from the burdens of taxa- 
tion which they now bear. Poll taxes and even 
dog taxes would thus become things of the 
past. 



8o 

The Federal Government could sustain itself 
by merely taxing those great natural resources 
which it is now proposing to "conserve for the 
people." This plan for supporting the Federal 
Government, by taxing the nation's natural re- 
sources, would be real conservation — a conserva- 
tion which would put money into the pockets of 
all the people by lessening their present out- 
rageous tax burdens. The preservation of these 
resources in this way would redound to all in- 
stead of to the few individuals who have been 
allowed to monopolize them. The exemption 
from taxation of all buildings and other improve- 
ments on land would at once multiply build- 
ings and other improvements, while the casting 
of the burden of municipal taxation upon the 
land, irrespective of improvements, and accord- 
ing to the value given to it by its location, would 
make it impossible for the speculator to hold 
land out of use in the cities and elsewhere. The 
more the scheme of taxation as a remedy is con- 
sidered, the clearer its completeness and feasibil- 
ity appear. Our State Legislatures, under deci- 
sions of the United States Supreme Court, may 
cast the burden of taxation upon any class of 
property, to the exclusion of all other classes of 
property. So that, working along the line of 
least resistance, a State law may be passed ex- 
empting all buildings on land to the amount, say, 
of $3,000 or $5,000. This would at once relieve 
most of our homes from taxation, while increas- 
ing but slightly the tax on the land upon which 
the home is built. So slight an exemption as 
$3,000 of improvements would prove so bene- 
ficial in every way that the exemption from taxa- 
tion of all improvements would soon follow. 

This exemption of improvements would neces- 
sitate the assessment of taxes on land only, and 
as the assessors are already directed to assess 
property at its full value, the most valu- 
able land, that is, the land from which the 



8i 

largest rent is gathered, would pay the greatest 
part of the taxes. Thus society would absorb, 
by taxing the income, or share, called rent, 

what now goes, as unearned increment, to enrich 
the owners of our large estates and the specula- 
tors and gamblers in vacant land. 

The perfect simplicity of a land value tax, 
when compared with our modern complicated 
methods of collecting revenue for the support 
of government, is even more striking than the 
land value tax as a remedy for panics and busi- 
ness depressions. What can be simpler than 
have the government charge the occupant of a 
residence or business site just as we charge the 
occupant of a church pew, a theater seat or a 
hotel room, to wit, according to its desirability 
or value through its nearness or juxtaposition 
to the center of attraction, to wit, the pulpit, 
the stage, or the business or residence sections? 
This scheme of taxation would at once lessen the 
tax burden of the farmer while increasing and 
enlarging the market for his crops. Such a 
thing as selling lots on installments would be 
almost impossible, for wages would be so high 
and employment so constant and vacant lots so 
cheap that every young man, by the time he was 
ready to marry, would have saved enough to buy 
the lot on which he wished to build a house. Such 
a thing as "slaving and saving" for years to 
get a home paid for, as we do now, would come 
to an end at once, for larger incomes and cheaper 
houses would eliminate the difficulty of home- 
getting. The present price of land is a monop- 
oly price, not the price under free conditions. 

The filthy tenements that disgrace our cities 
would disappear as if by magic, for the reason 
that the enormously increased business resulting 
from the increased purchasing power of the 
great industrial class would necessitate the tear- 
irrg down of the tenement districts and the erec- 
tion of warehouses, stores and office buildingfs 



82 

on the land on which they stood, to accommodate 
this increased business. Under this plan of taxa- 
tion our cities and towns would grow like weeds, 
for the half -housed populations, hungry for 
homes, but now managing to exist in their too 
restricted quarters, would spread out into larger 
quarters, and every family would demand and 
could have a large house with ample grounds 
around it, with yard room, sunlight, air and 
flowers for the rising generations. Humanity 
would at once step to higher levels of physical, 
mental and moral development, for with the 
driving away of poverty and the fear of poverty, 
all men would find lifted from their lives that 
burden which sinks the spirit and discourages 
more men than any other kind of evil. Wars 
would cease, because conquest of other countries 
would not enable the few, who impel nations to 
war, to profit as they do now by the monopoly 
of the land of the conquered nation. With plenty 
everywhere, sickness, ignorance, crime, greed, 
ugliness and vice would disappear, and man 
would come back again to his own. Having been 
made in the image of his Maker, he would soon 
try to imitate his Maker by spreading happiness 
and good cheer in all directions. 



CHAPTER XIV 

A WORD TO THE LAWYER 

Our profession, like nearly all professions, is 
overcrowded. We are told that "there is room 
at the top." So there is, for the few, and for 
those of the few who will pay the price. But 
we, like other men, want room at the bottom, 
where the great majority of us are bound to 
stay. The lawyer must protect himself against 
the wealth concentration which makes his pro- 



83 

fession a superfluity. His business, as an 
adviser to business men, will be far better when 
twenty separate business men are able to do busi- 

kfnl "JJi r '^^'' °^" "^"^^^^ than if twenty 
nirnf "^^^^^^^^^^ ^^^ Only half done under one 
name and under one roof. He will do a better 
busmess when twenty separate millers are grind- 
ing grain m his city than if all the ^rlin is 
ground by twenty mills combined into a trust 
He will do a better business when the wealth of 
the country IS equitably distributed among all its 
producers than he can do when a dozin men 

fourths of the population die almost penniless. 
Ihe pauper needs no lawyer to draw his will, 
and when he dies intestate his demise takes no 
business to the Surrogate's, Prothonotary's or 
County Clerk's Ofilce. If the LAW is an hon- 
orable profession, as I believe it is under normal 
conditions, the lawyers should protect it from 
the destructive forces of wealth-concentration. 
A tew big lawyers may make millions in effect- 
ing the concentration which crushes the small 
awyers, while the small lawyer has compara- 
tively as little chance of becoming a big lawyer 
as has the average citizen of becoming President 
of the United States— which is something less 
than one chance in a million. 

A Word to the Other Professions 

As a doctor, a teacher, an architect, a minister 
a newspaper writer, or what not, your success 
will depend more upon the opportunity to use 
your talent than upon your possession of the 
talent. Concentration of wealth in the hands 
of the few destroys opportunity. A thousand 
prosperous families owning their homes and 
having normal purchasing power, will provide 
more employment for every professional man 



84 

than will a thousand families, owning nothing, 
crowded into contracted tenement quarters. 
Your interest lies in the direction of wealth dis- 
tribution, and this little book should appeal to 
you from the standpoint of intelligent selfish- 
ness, which is the very highest altruism. You 
are to consider whether it is better for you to 
have the "400" of our cities gorged with wealth, 
while their neighbors are struggling to make 
both ends meet, or whether it will be better If 
all the people are comfortably housed, clothed 
and fed, with some extra money to call you in 
when needed. 



CHAPTER XV 

SUMMARY 

If George Washington, who drove from Mt. 
Vernon down to Alexandria to church every 
Sunday through mud up to his carriage hubs, 
could see our Empire State Express and our 
Eighteen-Hour Chicago Specials ; if Columbus, 
who was 70 days crossing the Atlantic, could see 
our Lusitania, which now crosses it in four and a 
half days, steam into our harbor ; if Hendrix 
Hudson, who three centuries ago sailed up our 
beautiful Hudson River, could now see the 20- to 
45-storied sky-scrapers at its mouth ; if Benjamin 
Franklin, who coaxed the lightning out of the sky 
over a century ago, could see the vast maze of 
telegraph and telephone wires we now have, and 
could see us talking to men in Chicago and St. 
Louis, as we do to men in the same room, or 
could he see the modern leviathans communica- 
ting with one another and with the land by wire- 
less telegraphy ; or could this hand press printer 
see one of our modern printing presses in opera- 
tion, printing, folding and counting thousands of 



85 

papers an hour — if all of these could compare 
what we have, in the way of labor-saving 
machinery and general progress with what they 
had, and then would see the abject and pitiful 
poverty on all sides as the horrible complement 
of this tremendous power of productivity and 
distributivity, what would they say of us, of this 
generation of men? It seems to me that their 
condemnation of our waste of our God-given 
opportunities in the shape of inexhaustible re- 
sources on all sides, would be inexpressible. 
They certainly would say: "You have well 
learned how to produce wealth, but you have 
not yet learned how to distribute it. All this 
degrading poverty should not exist alongside the 
great fortunes to be found on every hand." 

The BIBLE says, "The land shall not be sold 
forever." The Revised Version puts it ''in per- 
petuity," and no nation ever has or can with 
safety disregard this fundamental injunction. 
We are disobeying the Bible. The fee sim- 
ple is distinctly un-Biblical. The divine law 
is, "the Earth is the Lord's and the fullness 
thereof," and we are his people. The majority 
of mankind, from the cradle to the grave (and 
even for their graves), pay a big price to the 
owners of the earth for living on the earth. The 
owners of the earth in some countries are called 
Kings, Dukes, Counts, Lords, etc., but the name 
is nothing, the principle is the thing. Here in 
"free America," as we suppose it to be, our 
people pay billions of dollars of their substance 
for living on the earth, for the mere use of land, 
and these billions enrich the few, who collect 
the rents for its use, and impoverish the many 
who pay. 

The price paid as rent is not "All the traffic 
will bear," but more than it will bear, which 
kills the traffic by driving men into bankruptcy. 
When another dollar of rent can be collected the 
"system" will go after it. 



86 

Of course the landlord has the right to do as 
he pleases with his own, but he must so use his 
own as not to harm or destroy another. The 
slave owners had the right to sell women and 
children on the auction block, but we outgrew, 
at great loss of life and money, their exercise of 
that right in that way. We have, however, a 
more subtle method of producing almost the same 
results. Millions of women sell themselves on the 
streets of our large cities, and little children 
are sold into industrial slavery in this and other 
countries — all to satisfy the greed of our land 
system. In New York City alone marriages were 
25% less during the last six months than they 
were for the corresponding six months of last 
year, which illustrates how panics aflfect the mat- 
rimonial market. Indeed matrimony is getting 
to be a luxury, while the French method of liv- 
ing together is becoming so common in our 
American cities that marriage is looked upon by 
many as an indulgence which only the foolish 
commit. 

The duty of self-preservation and of preserv- 
ing the American home requires that we pro- 
tect ourselves against the ravages of the real 
estate speculators and the gamblers in and 
monopolizers of our natural resources. 

"You take my house when you do take the 
prop that doth sustain my house." So he takes 
the life who takes the land from which that life 
must live. 

If this little pamphlet will lead any of its read- 
ers to think and work toward this end I shall be 
amply repaid for my trouble in laying my argu- 
ment before them. 

JAMES P0LLOCK K©HLER, 
Counsellor at Law, 
40-44 Court Street, 
(Temple Bar) 
Brooklyn, New York City. 



'4T IS NO DISGRACE 
TO BE POOR'* 

The disgrace is in not knowing 
why you are poor 

THIS BOOK 
WILL TELL YOU WHY 



Land 



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